Cutting back is the new splashing out as American reach 'peak price rises'

The longer the cost of living remains elevated, the more typical Americans are having to cut back on their spending.

With the Fed yet to start a meaningful rate cutting agenda and inflation still pushing prices higher, many consumers are at the limit of what they can afford - and what they will tolerate – as highlighted by a new report.

Empower’s survey of more than 2000 over 18s reveals that 82% say their money isn’t going as far as it did and 62% say their purchasing power is decreasing as income is not keeping up with prices. This means spending less on staples and being strict on what they will accept in price hikes.

Nine in ten respondents said they are fed up with higher prices, 47% have less disposable income, 35% have less in emergency savings, 24% say their net worth is shrinking, and 17% worry they'll have to work longer to retire.

While more than three quarters of respondents report spending more of their budget on essential items, 27% are sticking to a limit on items or cutting them from their grocery list altogether, while others are switching to generic brands.

For example, over a third of poll participants said they would not pay $1 more for a cup of joe, although Starbucks’ recent quarterly results suggest coffee is not high on the list of cutbacks for many people.

Generations have their own red lines with 20% of Gen Xers saying an extra buck for a loaf of bread would take too big a slice out of their budget, 20% of Gen Zs would stop buying fresh fruit and vegetables if they cost an extra dollar, and 20% of Millennials would dump snacks such as bags of chips or chocolate bars if they went up $1.   

The survey also found that financial goals remain paramount with 30% of respondents willing to sacrifice their vacation time in order to achieve their financial goals while 22% would give up their dream home.