Inflation climbs to a 40+ year high. These are the ways Americans cope

“The war in Ukraine – February, March – was the turning point,” says KK Davey, who tracks buyer behavior at market research firm IRI.

Davey says that since Russia’s invasion of Ukraine, gasoline prices have skyrocketed, even middle-income consumers have begun to struggle with price increases. They are increasingly turning to discount stores and opting for cheaper generic products.

Joanne Lee now buys regular eggs, not the more expensive, free-range eggs she prefers. She also swapped out her salad toppings.

“There’s a certain crouton that I like. But it’s about $1.50 more than the generic Kroger brand, so I switched,” Lee says. “They’re not bad. But they’re not the quality I usually like.”

Lee, who lives in West Lafayette, Ind., isn’t skimping on her dog, Potato, though. The golden doodle always gets branded pet food.

“She had spoiled again,” Lee laughs. “She eats the most expensive food of all of us.”

Davey says it’s not unusual for shoppers to skimp on some items while splurging on others. They may try to stretch a tube of toothpaste or a bottle of ketchup longer, but when products like toilet paper or baby formula are in short supply, price isn’t an issue.

“If you gotta have it, you gotta have it,” says Davey.

While consumers may be watching their pennies at the gas station and the grocery store, they are still opening their wallets for expensive meals at restaurants, plane tickets and hotel rooms. Overall, consumer spending has grown faster than inflation every month this year.

When it comes to travel and entertainment, many people are making up for lost time.

“For this summer, there’s a mindset of, ‘We’re going on vacation and we’re not postponing it,'” says Wells Fargo economist Tim Quinlan. “Although consumers aren’t happy with the prices, they’re somehow willing to pay to have these experiences for a while.”

Expenses can’t last forever, though

But with inflation outpacing income, many people have to dip into their savings to fund these expenses or put them on their credit card. The personal savings rate hit a 14-year low in April, while revolving credit has increased at an annual rate of almost 20%.

Quinlan says it can keep spending for a few months, but not indefinitely.

“Come Labor Day, when all those credit card bills come due, everyone will be on a budget again. And that’s why we expect growth to slow as we approach end of the year.”

Travelers transit through Miami International Airport in Miami on April 22. Although many Americans are cutting back on certain things, they continue to splurge on travel and restaurants. Daniel Slim/AFP via Getty Images

Ultimately, Quinlan says, it will likely take a slowdown in consumer spending to get prices under control.

The Federal Reserve is working to accelerate this by raise interest rates and make it more expensive for people to borrow money.

Fed actions could help bring inflation down, but some worry they could trigger a recession.

And Watkins, the teacher who switched to cheaper sparkling water when LaCroix became too expensive, knows that not everyone can adjust their spending so easily.

Watkins volunteers at a Chicago-area food pantry where he’s seen a huge spike in traffic over the past six months.

“The people who really suffer from gas prices and food prices are those who don’t have a lot of room,” he says. “They don’t know where to cut.”

As prices continue to rise, more people may have to make tough choices about what to live without.

About Joan Dow

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