Consumer Tipping Point: 3 Glaring Signs That Americans Are Struggling Financially in 2024

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  • Consumers are finally starting to pull back at the tills, suggesting this rate hiking cycle is having its desired effect.
  • Credit card balances and delinquencies are on the rise, but consumers appear to be using less credit.
  • Eating outside of the home is one category that also appears to be seeing some recent pullback.
consumer trends - Consumer Tipping Point: 3 Glaring Signs That Americans Are Struggling Financially in 2024

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More Americans are struggling financially, and it’s more evident these days. Recent estimates suggest 65% of Americans live paycheck to paycheck, up from 58% last year, according to a recent CNBC and SurveyMonkey poll of 498 U.S. adults. The CNBC poll asked 4,342 adults in total globally, including people from Mexico, Australia and Singapore participants. Given the results, we may finally be reaching the consumer tipping point the Federal Reserve has seemingly been attempting to engineer with its rate hiking cycle.

Among those living paycheck to paycheck, financial stressors included inflation (69%), lack of savings (59%), rising interest rates (28%), credit card debt (33%), medical bills (28%), layoffs (21%) and student loans (15%).

Inflation rose in 2024, credit card rates hit a historic high of 22.8% in 2023, and average credit card debt reached $6,501.

A total of 47% of Americans have emergency savings. For financial stability, 42% emphasized less spending, 33% prioritized a well-paid job and 11% said they had a business.

Here are some signs that Americans are having financial problems.

#1 Shoppers Are Not Buying as Much

Consumer behavior has shifted in two main ways. Firstly, purchase occasions remained the same or increased compared to 2022, but consumers bought fewer items per trip. This decline in units per trip, ranging from 3% to 5% across grocery, health, beauty and household categories, outweighed the growth in purchase frequency.

Despite overall volume declines, Gen Z showed a 10% increase in grocery and health and beauty product purchases in 2023 compared to 2022. That led to a rise in grocery shopping frequency by one to two times per month and health and beauty product shopping every other month. 

Consumer spending shifted from traditional brick-and-mortar to online and value channels. However, volume losses in physical stores outweighed the gains in online and value channels.

Although interest rates are high, strong consumer spending has supported the U.S. economy, driven by a solid job market and rising household income. Lower-income Americans, however, have cut back on spending due to inflation. 

The Fed monitors this closely, as a significant drop in spending could impact the economy and future rate decisions.

Consumers may initially show interest in your products but then refrain from buying them. Salsify’s research revealed that 58% of shoppers abandoned purchases due to high prices, with economic concerns heightening this focus. 

Additionally, 39% are increasingly budget-conscious, and 35% prioritize essentials over nonessentials, highlighting the importance of offering competitive deals.

#2 People Using Credit Cards Less

In December 2023, the U.S. credit card debt hit a new high of $1.13 trillion. New York Life’s “Wealth Watch 2024” survey reported that Americans owed over $7,000 in credit card debt when 2023 ended. While most are maintaining or increasing their payments, about a quarter are paying less, with an average monthly fee of $363 in 2023, down from $430 in 2022.

According to Matt Schulz, LendingTree’s chief credit analyst, high credit card interest rates and increased costs for everyday items have led many to contribute less towards debt repayment. Schulz emphasizes the long-term consequences, explaining that unpaid balances accrue interest, hindering debt reduction and savings. Ultimately, this reduces funds available for emergencies or retirement.

Americans also struggled with rising credit card debt, which reached $143 billion in Q4 2023. Delinquency rates for credit cards and auto loans surpassed pre-pandemic levels, with only student loans not experiencing this trend. Evercore ISI noted that increased debt and delinquencies indicate lower-income consumers are depleting their savings and relying on credit to fund their spending.

#3 People Are Going Out and Eating Out Less

Sharing meals at home or dining out wasn’t just about food; it was also a chance to bond with loved ones. Whether one was a budget-conscious cook or a culinary enthusiast, dining habits affected finances. U.S. consumers usually use 13% of their income for food. Although whether it’s for grocery or restaurant is discretionary.

Four years after the pandemic shutdowns, American restaurants are still grappling with a crisis, evident in declining dining experiences. Staff shortages have led to slow service, disorganization and order errors. 

At the start of 2023, the National Restaurant Association reported 400,000 fewer employed employees, with most restaurants understaffed. Despite employment rebounding by the end of the year, nearly 1 million job openings persisted, and Toast noted a 74% annual turnover rate.

Amidst the looming threat, most restaurant owners needed help finding solutions. At a hospitality conference last fall, leaders admitted their uncertainty about hiring. Some hoped a recession would motivate people to work in hospitality, while others considered artificial intelligence.

A 2023 Toast survey revealed that bad managers, low pay and poor work culture were the main reasons for staff turnover. Despite recognizing the need for change, many in the industry hesitated due to customer expectations.

According to a 2018 NPD Group report, approximately 82% of meals and snacks were prepared at home, a significant increase from a decade earlier. Despite a strong economy, per-person restaurant visits dropped to a 28-year low of 185, down from a peak of 216 in 2000. The shift was influenced by factors like the costs of eating out becoming cheaper than making homecooked meals.

Bottom Line

Pandemic relief included stimulus checks, increased unemployment benefits and an expanded Child Tax Credit for U.S. households. However, as these pandemic aids ended, some faced increased financial strain. 

Dana Peterson, the chief economist of The Conference Board, highlighted consumer frustration with the inability to purchase desired homes due to higher mortgage rates, though not as high as 8%.

This situation mainly affects younger Americans, who feel they are missing out on significant life milestones like homeownership.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.


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