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Americans say their finances are worse than last year: Report

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Yahoo Finance's Denitsa Tsekova breaks down a recent report on consumer sentiment among U.S. households.

Video Transcript

[MUSIC PLAYING]

- Welcome back. In our Your Money segment, we're taking a closer look at how Americans are feeling about their finances on the same day that the inflation print we got out this morning came in at a 30-year high. It's worth digging into how they're feeling about their finances given some of the data that we've gotten. Yahoo Finance's Denitsa Tsekova joins us now for a closer look on why more consumers are more concerned about their finances. Denitsa?

DENITSA TSEKOVA: Yeah, so what we're seeing is that Americans are reporting that their finances are worse off than a year ago and that their expectations of missing a debt payment have increased. What we're seeing, actually, is that delinquencies have remained low. They've actually decreased. And wages have increased for lower income households, which are the most concerned about this.

So the measure we are looking at is the probability of missing a minimum debt payment in the next three months. That measure reached its highest point since May 2020 according to the New York Fed. And also, we're seeing similar results from University of Michigan, which finds that consumer financial expectations have deteriorated, especially during the last year.

And there are different factors to that. The first one is personal finances, which we may argue are kind of healthy at the moment. But then the other one is what their expectations are about the external conditions.

And consumers are seeing a drop in expectations about their personal finances. But the bigger drop and the more significant driver is really their expectations about business conditions in the next year, in the next five years. And of course, we can't ignore the numbers from today.

That's definitely one of the biggest drivers. Inflation numbers, elevated levels for a very long time. So that's definitely driving it.

But the group that is most concerned is really lower income households. Households making below $50,000. Those are the ones concerned about not making the debt payments.

But those are households who saw wage increases. They're also potentially still getting the Child Tax Credit they may be getting in the next year. So their personal finances are potentially healthy. But they may be expecting conditions to deteriorate.

- Yeah, I want to say that I wonder what the data would look like if it came out after this CPI read, right? Because we see fuel prices up 59% year over year. The cost of meat, dairy, fish up 12% year over year.

So there are a lot of issues that people are dealing with. What is the role of government? What are they doing in offering some sort of relief in how Americans feel about their finances?

DENITSA TSEKOVA: Yeah, so a big factor of how Americans feel about their finances is their expectations and what they're hearing. And we've seen a significant increase in unfavorable news according to University of Michigan. So definitely the inflation numbers either from today or the last few months are playing a significant role.

But when it comes to government relief, that definitely helped in the last 18 months and really elevated levels of consumer confidence. And as we know, that government relief is expiring. And that's also a factor.

But just a reminder, the households that are most vulnerable and most concerned about their finances, the lower income households, they're seeing wage increases. But they also continue to get the Child Tax Credit payments, which for the lowest quintile, those making below $25,000, is a 35% boost of their income. So that's a significant support for those families.

- Denitsa Tsekova with the latest look there at the health of the American consumer. We'll see how that changes. Thanks again for that.

Going to take another quick break here on the show. But when we return, NVIDIA shares up more than 130% on the year. A discussion with the CEO and founder at the company. Jensen Huang is going to join us on the other side of the break. And everything that the company is doing to navigate the chip shortage, coming up right after this.