TransUnion 2Q24 Consumer Pulse Report Shows Rising Inflation Worries

TransUnion’s Q2 2024 Consumer Pulse study shows 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 driven mainly 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 five percentage points to 84%) and interest rates (up five percentage points to 46%) from one year ago. The newest Consumer Pulse study is based on a survey of 3,000 American adults from April 29-May 8.

“Consumers face distinct challenges when considering today’s high inflation and interest rate environment. From filling up a gas tank to making a rental payment to buying groceries, most consumers are paying more today for everyday expenses than ever. 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, most consumers remain optimistic about their finances. With low unemployment and healthy wage gains, consumers continue to feel good about their prospects – with the youngest generations leading the way.”

One of the most precise data points is that inflation is by far the greatest challenge facing consumers. Half of all respondents said inflation is their top concern, with the next highest worry being housing prices (rent or mortgage), chosen by 13%.

The study points to a widening gap between those who say their household incomes are keeping up with inflation and those who say they are not. 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 several 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 were gasoline for cars (up 11 percentage points) and dining out, takeout, and meal delivery (up seven 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.

Turning to credit during times of elevated inflation and high interest sets up an interesting dynamic. Some consumers need more credit to manage their growing expenses, but high interest rates could add more to their debt burdens if they do not pay off their credit products promptly.

The Consumer Pulse study shows that consumers’ appetite for new credit is winning in this dynamic. 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 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 simultaneously as 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. Also, 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 insignificant 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 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.

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