Are Americans Adjusting to Inflation?

Banking and Payments Intelligence Report
October 2022

Are Americans Adjusting to Inflation?

Inflation isn’t going away anytime soon. But according to the latest J.D. Power data, some signals suggest that Americans are getting a better handle on how to manage their finances in the face of challenging economic conditions.

According to the data, the share of American banking customers now classified as financially healthy[1] increased four percentage points, this month, the largest increase in nearly a year. What’s more, number of customers that said the cost of goods increased faster than their income fell for the first time since we began tracking the metric in March 2022.

While the improvement is modest—and a significant majority of American consumers are still experiencing financial difficulties—supporting data suggest that many Americans are starting to change their spending habits to adapt to rising prices.

Financial Health Improves Slightly

Although it is still too early to call it a rebound, some key indicators of financial health are starting to show month-to-month improvement. Notably, 34% of U.S. bank customers are now classified as financially healthy, up four percentage points from July.

Meanwhile, the percentage of banking customers who said the price of goods is increasing faster than their income, decreased one percentage point to 71% in August.  

Spending, Budgeting, and Saving Strategies Evolve

Americans also seem to be adjusting their spending to mitigate the stress caused by inflation. Currently, 86% of consumers say they are taking action to manage inflation in their lives today with steps such as increased budgeting, buying fewer items to stay on budget and increasing savings to safe for future services. For example, in October 2021, 12% of bank customers told J.D. Power that they do not have a budget. In August, that number fell to just 8%.

The biggest changes in consumer spending behaviors are focused on dining options and discretionary spending on items such as clothing.

While Americans are reining in spending, it seems that they are backing off some of the emergency measures they took over the summer.  The number of Americans that reduced their savings to pay for immediate expenses decreased month over month, as did the percentage of those that experienced increased need for credit to pay for immediate needs.

Banks to the Rescue?

While banking customers try to navigate this financial landscape, banks are still slow to offer solutions that are making a meaningful difference. One-fourth (25%) of customers wish they received information from their bank about strategies and tool to manage inflation, save in a recession or pay down debt in a recession.

When asked what banks could do to make products compelling enough to use, Americans were quick to mention rewards, such as cash back, higher-yield rates and discounted fees (34%). Also, 13% said they would like to be emailed a link explaining benefits of such a tool, and 8% want to be walked through their options at a local branch.

Guiding to the Light

While the overall outlook on American financial health is still far from optimistic, the behavioral changes we are seeing in the data suggest many Americans are starting to adapt to the current inflationary environment.

For as long as that challenging economic environment persists, banks have an opportunity to make meaningful inroads in their relationships with their customers. Now more than ever, customers are looking to their financial institutions for guidance, and are receptive to programs banks have long been after customers to adopt. Handled properly, the current economic downturn could present an opportunity for banks to earn goodwill and advocacy by helping customers address their pain points.

Find out More

This Banking and Payments Intelligence Report is based on responses from 4,000 retail bank customers nationwide and was fielded in August 2022. It was authored by Jennifer White, senior director of banking and payments intelligence at J.D. Power. Please contact us at the numbers below to connect with Ms. White or to learn more about the underlying research.

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; brian.jaklitsch@jroderick.com

Geno Effler, J.D. Power; West Coast; 714-621-6224; media.relations@jdpa.com

[1]  J.D. Power measures the financial health of any consumer as a metric combining their spending/savings ratio, creditworthiness, and safety net items like insurance coverage. Consumers are placed on a continuum from healthy to vulnerable.