As the price of what is in the pantry goes up, consumers who live on paychecks suffer, disproportionately.
The ripple effect can force consumers, even those who don’t have a hard time making ends meet, to stick to the flow. This would create a headwind, at least in part, for credit card spending.
The Bureau of Labor Statistics said earlier this month that grocery bills have steadily increased month over month and increased by 40 basis points in August. For the 12 months ending in August, according to the data, the segment was up 3.7%. Digging a little deeper, the prices of food consumed at home increased by 3%.
Many segments of what people buy to consume have seen prices rise: Labor Department statistics show the index for meats, poultry, fish, and eggs rose 0.7% over the course of the year. month ; the beef index rose 1.7%. The fruit and vegetable index rose 0.2% in August after declining in July. Part of the increase can be explained by the fact that producer prices (as measured by the producer food price index) increased by 12.7% year on year. At least part of the costs are passed on to the consumer.
This can be problematic for individuals and families living paycheck to paycheck. PYMNTS has estimated that up to 54% of consumers live on paychecks, which equates to 125 million people. This includes 53% of people earning between $ 50,000 and $ 100,000 per year.
Read more: New report: 53% of high-income Americans live paycheck to paycheck
Living from paycheck to paycheck means struggling to pay bills, and groceries are one of the most basic staples you and your family need. The more expensive this component, the more the paycheck consumer has to consider doing without it, or perhaps lengthening other bills. Either way, this is not an optimal result.
And beyond that, when it comes to how consumers will pay for the food they need, the channels are changing. In a recent report titled “What Consumers Expect from Their Grocery Shopping Experiences,” a collaboration between PYMNTS and ACI Worldwide, we found that an increasing number of consumers are turning to online channels to make their purchases. home groceries (34% of consumers shop online for at least one of their usual grocery items online).
See more: What Consumers Expect from Their Grocery Shopping Experiences
By exploring actual payment methods, just over 65% of respondents who buy groceries online say they use credit cards; around 56% say they use debit cards, so there is some overlap. Of those who buy groceries in-store, about 55% say they use debit, and just over half use credit.
The impact, as food becomes more expensive, no matter where it is purchased, is to take out credit and spend cash on the counter. After all, the proliferation of credit card debt would become another bill to contend with, with dire consequences in the event of non-payment. This means that consumers might be very careful.
Food for thought, indeed.