Inflation is seriously changing Ligia Murillo's buying patterns — and she's upset about it. “Prices are out of control,” Murillo, 55, of Norwalk, Conn., told Yahoo Finance. “I’m always looking for sales. I stopped buying steaks. I buy chicken; it’s less expensive.”
Like millions of people, Murillo's purchasing power has shrunk as inflation — at a 40-year high — continues to impact virtually every category of goods and services.
“I am angry,” Murillo said. “I’m angry with the government because they are not paying enough attention [to] the real situation we are living in.”
Murillo, who owns a small house-cleaning service, says she and her husband recently cut their expenses by switching their home insurance and canceling their local newspaper subscription. She says they rarely shop for discretionary items like clothing anymore.
‘People are reacting to higher prices’
Recent data signals consumers are beginning to cut back on some of the items that have gone up the most in price.
“You're starting to see a decline in spending across a number of categories where prices have increased significantly,” Omair Sharif, founder of Inflation Insights, told Yahoo Finance.
“Over the last six months, spending on beef products, in real terms after inflation adjusted, have gone down over 10% in just the last six months alone. People are reacting to higher prices and cutting back on items where prices have gone up a lot, and we can see that in the data,” he added.
In 2022, consumers expect "to spend more on groceries, utilities, and at-home basics while many signal they will spend less on discretionary items and out-of-home occasions” according to NielsenIQ's latest Consumer Outlook survey.
Poll: Is inflation leading you to buy fewer goods and services related to housing, food, and gasoline?
— Yahoo Finance (@YahooFinance) February 10, 2022
The major surveys and data sets don’t yet separate according to income levels. However, commentary during PayPal’s (PYPL) latest earnings call gave a glimpse into how some lower-income consumers are dealing with inflation.
“We’ve seen weakness around spending in our lower-income cohorts, and imagine for us, the percentage of our user base is pretty similar to what you see just like in the U.S. overall,” CFO of PayPal John Rainey said during the call.
‘How do seniors and people with children survive this?’
Food, housing, and gasoline make up a big chunk of consumer spending — expenditures which are difficult to get around, particularly when it comes to rent.
“The problem is it’s hard to cut back on things like shelter. If you need to pay rent, that’s not going to change. So that sort of burden falls more on people who are in the lower-income distribution,” said Sharif of Inflation Insights.
Murillo says "by the grace of God" she and her husband don’t only depend on her house-cleaning income. They own three small rental properties nearby. She and her husband haven't raised rents to market value since prior to the pandemic because their tenants pay on time and have children.
“I feel scared, I get angry, I get sad. How do the seniors and people with children survive this?” she asked.
Ines is a markets reporter covering stocks from the Nasdaq.
Follow her on Twitter at @ines_ferre
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