Concerns About Inflation and Interest Rates Increase to Highest Levels in Two Years Even as Majority of U.S. Consumers Remain Optimistic About Finances
12 Juin 2024 - 2:00PM
TransUnion’s (NYSE: TRU) newly released Q2 2024 Consumer Pulse
study found that consumer concerns about inflation and interest
rates reached their highest levels in two years. Despite these
concerns, they come as 55% of Americans remain optimistic about
their household finances over the next year – the same percentage
observed in Q2 2022 and similar to a 57% reading in Q2 2023. This
optimism appears to be, in large part, driven by confidence in a
stable employment situation and continued wage increases.
When ranking their top three concerns affecting household
finances for the next six months, the study found marked increases
in concerns about inflation for everyday goods like groceries and
gas (up 5 percentage points to 84%) and interest rates (up 5
percentage points to 46%) from one year ago. The newest Consumer
Pulse study is based on a survey of 3,000 American adults that ran
between April 29 and May 8, 2024.
“Consumers are facing distinct challenges when taking into
account today’s high inflation and interest rate environment. From
filling up a tank of gas to making a rental payment to buying
groceries, most consumers are paying more today for everyday
expenses than they ever have. And if they’re using a credit card to
make these purchases, their interest rates are at much higher
levels, so costs also are rising for those consumers carrying a
balance,” said Charlie Wise, senior vice president and head of
global research and consulting at TransUnion. “Despite these
challenges, the majority of consumers remain optimistic about their
finances. With low unemployment and healthy wage gains, consumers
continue to feel good about their future prospects – with the
youngest generations leading the way.”
Youngest Generations Most Optimistic
About their Finances; Inflation Top Concern Across the
Board
Generation |
Percent of Respondents Optimistic About Household Finances
in Next 12 Months |
Percent of Respondents Rating a Specific Topic as One of
Their Top 3 Concerns Affecting Household Finances in Next 6
Months |
Overall |
55% |
Inflation (84%) |
Housing Prices (47%) |
Interest Rates (46%) |
Gen Z |
65% |
Inflation (77%) |
Housing Prices (56%) |
Jobs (51%) |
Millennials |
64% |
Inflation (82%) |
Housing Prices (51%) |
Recession (45%) |
Gen X |
47% |
Inflation (85%) |
Recession (50%) |
Housing Prices (47%) |
Baby Boomers |
49% |
Inflation (90%) |
Interest Rates (54%) |
Recession (43%) |
Diving deeper into inflation concernsOne of the
clearest data points from the Consumer Pulse study is that
inflation is by far the greatest challenge facing consumers. Half
of all respondents (50%) said inflation is their No. 1 concern,
with the next highest worry being housing prices (rent or mortgage)
– chosen by 13% of respondents.
The study points to a widening gap between those who say their
household incomes are keeping up with inflation versus those who
say their incomes are not keeping up. In Q2 2024, 48% of consumers
said their incomes were not keeping up with inflation – up from 46%
in Q2 2023. At the same time, just 31% agreed or strongly agreed
that their incomes were keeping up with inflation – down from 33%
one year earlier.
Why is inflation such an issue? Consumers pointed to a number of
areas where rising prices are of particular concern, including
groceries (84%), gasoline for cars (66%) and utilities (55%). The
largest quarterly increases in rising price concerns between Q1 and
Q2 2024: gasoline for cars (up 11 percentage points) and dining
out, take out and meal delivery (up 7 percentage points).
“As the cost of living continues to increase, we are seeing
clear behavioral changes, with those being ‘inflation concerned’
more likely to cut back on discretionary spending and cancel
subscriptions or memberships, while also being more likely to turn
to credit cards to help them through these challenging times,” said
Wise.
Impact on credit demand and usageTurning to
credit during times of elevated inflation and high interest sets up
an interesting dynamic. Some consumers are in need of more credit
to manage their growing expenses, but high interest rates could
potentially add more to their debt burdens if they do not pay off
their credit products in a timely manner.
The Consumer Pulse study shows that in this dynamic, consumers’
appetite for new credit is winning. Of the 31% of consumers in Q2
2024 who said they plan on applying for new credit or refinancing
existing credit within the next year, 59% said they’ll apply for
new credit cards in that time period, up from 53% in Q2 2023. As of
Q1 2024, consumers hold more than 543 million credit cards – by far
the most popular credit product.
The increased interest in credit cards comes at the same time
more consumers are worried about high interest rates. Nearly two in
three consumers (65%) said rising interest rates will moderately or
highly impact whether or not they apply for credit in the next 12
months. As well, the percentage of consumers who said they planned
to apply for a mortgage, home equity line or personal loan – credit
products that are highly sensitive to interest rates – have all
dropped materially from prior year levels.
The youngest generations are the most concerned by rising
interest rates as it relates to new credit products: 80% of Gen Z
and 77% of Millennials said rising interest rates will moderately
or highly impact whether or not they apply for credit in the next
12 months. The impact is not as significant for older generations –
Gen X at 67% and Baby Boomers at 41%.
“When historians look back at this time years from now, it will
be clear to them that the dynamics at play in the current credit
market are a direct reflection of the inflationary and high
interest rate pressures consumers face today. In our view, the far
majority of consumers are meeting the challenges they face today –
aided by a strong employment picture. What portends for the
remainder of 2024 and into 2025 will likely be dictated by three
things: the employment situation, interest rates and inflation,”
concluded Wise.
For more information about the Consumer Pulse study, please
click here. To learn more about inflation and its impact on credit,
click here.
About TransUnion (NYSE:
TRU)
TransUnion is a global information and insights
company with over 13,000 associates operating in more than 30
countries. We make trust possible by ensuring each person is
reliably represented in the marketplace. We do this with a Tru™
picture of each person: an actionable view of consumers, stewarded
with care. Through our acquisitions and technology investments we
have developed innovative solutions that extend beyond our strong
foundation in core credit into areas such as marketing, fraud, risk
and advanced analytics. As a result, consumers and businesses can
transact with confidence and achieve great things. We call this
Information for Good® — and it leads to economic opportunity, great
experiences and personal empowerment for millions of people around
the world.
http://www.transunion.com/business
Contact |
Dave
BlumbergTransUnion |
Email |
david.blumberg@transunion.com |
Telephone |
312-972-6646 |
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