Inflation concerns top of mind among consumers — here’s what they would cut first

Inflation is the predominant economic concern among consumers, although it hasn’t dictated their spending decisions yet.

That’s one of the findings of the ICSC’s Economic Event Sensitivity Survey, in which 50% of respondents said inflation has impacted their financial situation during the past 24 months. Consumers identified retail prices (77%), energy and gasoline prices (69%), employment status or wages (59%), and personal debt (59%) as the factors that have the greatest impact on their spending habits.

At the same time, however, recent retail sales numbers have reflected consumer optimism. (Overall retail sales, excluding auto, in February increased 8.7% year-over-year and were up 17.3% compared to their pre-pandemic period, according to Mastercard SpendingPulse.) The majority (77%) said that their spending decisions are dictated by personal circumstances rather than the overall economy.

In the face of economic hardship, consumers said that dining out (64%) and entertainment (54%) would be the first items to be cut. On the other hand, if personal financial situations or perceptions of the economy should improve, their additional spend is most likely to go toward higher quality groceries (52%), dining out (41%), and saving (40%). 

“While recent retail sales figures demonstrate consumer optimism, consumers are also acutely aware of the need to shift their spending with shifts in the economy,” stated Tom McGee, president and CEO of ICSC. “Consumer sensitivity to food, energy and other price increases could result in many dialing back their spending in other categories. Retailers will need to find ways to continue serving price-conscious consumers while expanding their offerings as pandemic-related restrictions and fears decrease.”

Other findings from the survey are below.

• At their peak, personal rates of savings topped 27%, and 80% of adults saved money during the pandemic, including 92% of Gen Z and 84% of millennial respondents. Those who saved noted they intend to continue saving that money (49%), use it to pay down debt (34%) or use it for retirement (26%). Perhaps as a result of increased saving rates, a majority of consumers (63%) feel prepared to manage their household’s finances in the event of an economic downturn.

• Only 35% of consumers cited the stock market and their personal 401k plans as drivers of their spending habits.

• Only 37% of consumers cited geopolitical issues around the world as a factor that impacts their spending, the current conflict in Ukraine is likely to add to inflation and impact consumer perception, according to ICSC.

• A plurality of Gen Z (49%) and millennials (47%) indicated their financial situation had improved in the past year, suggesting these groups will be critical in continuing the economic recovery of the pandemic.

The 2022 ICSC Economic Event Sensitivity Consumer Survey was conducted online from February 18-20, 2022. The survey represents a demographically representative sample of 1,007 respondents. This survey was conducted prior to the Russian invasion of Ukraine and resultingly does not reflect its impact on consumer perception and inflation.