With prices rising sharply across the country, from food to utilities to housing, Americans will stick to their budgets in 2022 more than ever before.
The Allianz Life Insurance Company of North America’s New Year’s Resolutions Study found that only about a quarter (26%) of Americans say they will spend too much in 2022, compared to 2021. In 2020 and 2020, the proportions are 28% and 32%, respectively. The company surveyed a representative sample of 1,000 respondents across the United States.
Yet while more people are maintaining good financial habits, many Americans say their financial situation is worse than it was a year ago. While the U.S. federal government’s pandemic stimulus has boosted Americans’ savings and improved their financial health over the years, average Americans have seen their financial situation slip again, according to the latest report from the Consumer Financial Protection Bureau. to pre-pandemic levels. The financial health of young Americans and Latinos, as well as all renters, is deteriorating fastest.
The outlook for 2023 is also grim. Two-thirds of Americans don’t expect their financial situation to improve in 2023, according to a recent Bankrate survey. In fact, about 11 percent of U.S. adults believe their financial situation will “seriously deteriorate” in the coming year. This is obviously not the most optimistic forecast for 2023.
There are a number of reasons why Americans are pessimistic about the financial outlook for 2023. Of course, an important reason is inflation. While inflation fell more than expected in November 2022, raising hopes that rate hikes by the Federal Reserve are having their desired effect, prices of goods and services rose by an average 7.1% year-over-year in November.
More than half (52%) of the respondents to the Allianz Life survey said their biggest concern was that the rising cost of living would affect their ability to pay their bills and save for the future. At the end of 2021, about 38% of the respondents had similar feelings.
According to Deloitte’s Global State of the Consumer Tracker in November 2022, less than half of Americans (47%) have money left over after paying off their bills at the end of the month.
Kelly Lavigne, Allianz Life’s vice president of consumer insights, said in a statement: “The past year has been a difficult one for Americans as inflation has weighed heavily on Americans’ finances. These challenges are not going away as we start the new year, so consumers would do well to plan to reduce their current risks.”
In addition to inflationary pressures, the U.S. could slip into a recession if the Fed fails to stick to its so-called “soft landing” goal of lowering inflation while avoiding a deep recession, an outcome that many experts now predict is inevitable. That could trigger more layoffs and push up the overall unemployment rate.
To make matters worse, some financial experts predict that the greater risk is stagflation, that is, Americans will not only bear the impact of high inflation, but also face high unemployment and slowing economic growth.
U.S. Treasury Secretary Janet Yellen has acknowledged that a U.S. recession is highly likely, but recently she seems to have become more optimistic than the average American. “There is a real risk of a recession,” she told CBS’s “60 Minutes” in a recent interview. “But in my view, it’s not an inevitable consequence of lowering inflation.”
But reducing the prices of everyday items will take time. Yellen believes that the U.S. could see a “substantial decline in inflation” by the end of 2023, barring any “surprise shock” to the economic system (such as the Russia-Ukraine conflict).
Yellen said: “I believe that the labor market will remain healthy so that people can feel more secure about their financial situation and their personal economic situation. I have great confidence in that.” (Fortune Chinese Network)
Translator: Liu Jinlong
Reviewer: Wang Hao
Amid sky-high prices for just about everything from food to utilities to housing, Americans stuck more closely to their budgets this year than in the past.
Only about a quarter (26%) of Americans reported overspending in 2022, compared with 28% in 2021 and 32% in 2020, according to the New Year’s Resolutions Study from Allianz Life Insurance Company of North America that surveyed a nationally representative1,000 sample of respondents.
Yet even while more people practiced good financial habits, many Americans said their financial situation is worse than a year ago. After several years of increased savings and better financial health thanks to federal pandemic stimulus programs to the average American back -pandemic levels, according to a recent report from the Consumer Financial Protection Bureau. Younger and Hispanics Americans, as well as renters saw the most rapid deterioration in their financial health.
The new year isn’t exactly looking bright either. Two in three Americans don’t expect their finances to improve in 2023, according to a recent Bankrate survey. In fact, about 11% of US adults believe their finances will get “significantly worse ” over the next year. Not exactly the most optimistic viewpoint heading into 2023.
There are reasons enough for the gloomy outlook. Inflation, of course, is playing a major factor. Even though inflation cooled more than expected in November 2022—giving hope to the idea that the Federal Reserve’s rate hikes are having the intended effect—the costs of goods and services last month still rose an average of 7.1% year-over-year.
More than half of those surveyed by Allianz Life (52%) say their biggest worry is that the rising cost of living will affect their ability to pay their bills and save for the future. That’s up from about 38% of respondents who felt similarly at the end of 2021.
Less than half of Americans (47%) have money left over at the end of the month after paying their bills, according to November 2022 data from Deloitte’s Global State of the Consumer Tracker.
“This has been a tough year for Americans with inflation creating havoc with their finances,” Kelly LaVigne, vice president of consumer insights at Allianz Life said in a statement. “These challenges aren’t going to go away when we flip the calendar, so it is best to make a plan for mitigating ongoing risks.”
In addition to inflation pressures, if the Fed fails to stick its so-called “soft landing” goal of bringing down inflation without causing a severe economic downturn, the US could be heading for a recession—an outcome many experts predict is inevitable at this point. That could lead to more layoffs and higher unemployment across the board.
Even worse, some financial experts see stagflation—where Americans will be contending with not only high inflation, but also high unemployment and slower economic growth—as a bigger risk.
Treasury Secretary Janet Yellen acknowledges there’s definitely a chance we’ll see a downturn, but she’s also seemingly more optimistic than the average American these days. “There’s a risk of a recession,” Yellen said recently in an interview with CBS 60 “Minute But it certainly isn’t, in my view, something that is necessary to bring inflation down.”
Bringing down the costs of everyday goods, however, will take some time. Yellen believes the US will see “much lower inflation” by the end of next year, barring any “unanticipated shocks” to the system (like the Russian invasion of Ukraine, for example).
“I am very hopeful that the labor market will remain quite healthy so that people can feel good about their finances and their personal economic situation,” Yellen said.
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