Consumers Expect Inflation to Stay High and Financial Stress to Rise

Group 1: Inflation Expectations - Consumers expect inflation to remain elevated, with median one-year-ahead inflation expectations steady at 3.2% and three-year and five-year horizons at 3% [3] - Anticipated cost increases in key spending categories include a 10.1% rise in medical care inflation and an 8.3% increase in rent expectations [3] - Food prices are expected to rise by 5.9% and gas prices by 4.1% over the next year, contributing to a perception of financial strain [4] Group 2: Income and Financial Stability - Households expect income growth at 2.9%, which does not keep pace with anticipated household spending growth of 5% [4] - Approximately two-thirds of U.S. adults live paycheck to paycheck, with 42% doing so out of necessity, marking an 18% increase since August [5] - Many consumers earn income through variable sources such as hourly, gig, and contract work, leading to challenges in financial planning [6] Group 3: Budgeting Tools and Consumer Behavior - There is a significant underutilization of budgeting tools, with nearly 70% of consumers living paycheck to paycheck and 24% feeling highly anxious about their financial situation [8] - Advanced budgeting apps are linked to improved financial comfort, with over half of users feeling financially secure compared to only 12% of basic tool users [9] - Despite the demand for better budgeting tools and real-time spending reminders, only 14% of consumers receive daily nudges, indicating a gap between demand and usage [9][11]