Americans have a grim outlook on the U.S. economy, and nearly two-thirds (64%) feel the Federal Reserve should be taking a more aggressive approach to addressing inflation, according to a new survey by the Nationwide Retirement Institute®. While older consumers are most likely to support stronger actions from the Federal Reserve (baby boomers 72%), even a majority of Gen Z (50%) agree the central bank should do more.
However, if the Federal Reserve increases interest rates as expected at its March 2022 meeting, the news will be met with mixed feelings. Consumers are most likely to feel worried (37%) or frustrated (30%) by news of a rate hike with just 23% feeling hopeful. Fourteen percent of all respondents say they would be confused, which rises to 25% among Gen Z.
“Following months of decades-high inflation, the war between Russia and Ukraine is intensifying inflationary pressures, worsening supply chain snarls, and spiking gas prices. It’s understandable that consumer sentiment is very low right now,” said Mark Hackett, Nationwide’s Chief of Investment Research. “But Americans should know that the economy is actually performing better than people think, job security is extremely strong, and even though we’ve seen a lot of market volatility, consumers have record wealth due to equity market and home price rallies.”
Americans are postponing or canceling major life events due to inflation
As inflation continues to rise, consumers are feeling the squeeze. Almost all consumers (90%) are concerned about the rising rate of inflation, and more than half (58%) say their purchasing power is declining.
As a result, consumers are setting aside major life events because of rising costs, especially younger generations. More than one-third (35%) of Gen Z and millennials (34%) have already postponed or are considering postponing plans to start a family. Additionally, 33% of Gen Z and another 28% of millennials have already postponed or are considering postponing plans to hold a wedding. This trend extends to older generations as well: more than one in 10 (13%) of consumers near retirement age (Gen Xers and baby boomers) have already postponed or are considering postponing plans to retire.
In addition to cancelling or postponing major life events, consumers across generations are making changes in their daily lifestyles. This includes:
- Eating out less (48%)
- Driving less (35%)
- Relying more on credit cards (21%)
- Looking for a better paying job (19%) – higher for Gen Z at 32% and millennials at 30%
- Moving in with family to save money (14%) – higher for Gen Z at 30% and millennials at 21%
- Reducing contributions to their 401(k) (10%)
- Most see U.S. economy getting worse through 2022
Consumers expected continued price increases and economic upheaval through the rest of 2022. Just 28% of consumers expect the current inflationary surge to be temporary, and the majority expect increases in housing costs, gas prices, interest rates, and the general cost of goods and services over the next 12 months. Fifty-five percent of consumers expect income tax rates to rise and 46% say the same of unemployment.
“While it’s understandable that consumers are relying more on credit cards and reducing their retirement plan contributions to soften the short-term effects of inflation, it’s important for consumers to consider the implications on their long-term financial strategy,” said Eric Henderson, president of Nationwide Financial’s annuity business. “This is an opportunity for consumers to work with a financial advisor to revise their spending budget so they can make day-to-day ends meet while still save for future goals, like retirement.”
Advisors can click here to see our latest insights on inflation and other financial topics to help plan client conversations.
Methodology
Edelman Data and Intelligence (DxI) conducted an online survey of 2,000 nationally representative adult U.S. consumers ages 18 and over on behalf of Nationwide. The survey was fielded from February 11 through February 17, 2022.
