A recent field note from the Federal Reserve Bank of Boston's Regional & Community Outreach department examines how U.S. households perceive and respond to changing prices. The research, which utilized national survey data, indicates that despite a significant decline in inflation over the past two years, many Americans remain concerned about price increases.
"Concern (about) future price increases has decreased over the past few years – but not by as much as we may have anticipated, given how much inflation has come down," said Michael Evangelist, a senior policy analyst and co-author of the study.
The field note, titled “Household perceptions of price changes and coping strategies,” identifies income, education, and recent job loss as critical factors influencing household stress related to price increases. These factors also affect coping mechanisms such as using loans or increasing credit card debt.
Amy Higgins, a research associate at the Boston Fed and co-author of the note, emphasized the importance of understanding how households manage higher prices. "If households can’t fully participate (in the economy) due to things like higher prices, inflation, or unemployment, then we need to understand what’s going on … in order to strengthen the economy overall," she stated.
Higgins clarified that falling inflation does not equate to decreasing prices but rather a slower rate of increase. "It just means that the rate at which prices are increasing has slowed," she explained.
The authors analyzed data from 20 waves of the U.S. Census Bureau’s Household Pulse Survey conducted between September 2022 and May 2024. They noted that although inflation peaked at 9% in June 2022 before dropping to about 3% by June 2023, concerns over price increases remained high among respondents.
As of May 2024, nearly 60% of respondents expressed ongoing concern about rising prices. The report suggests it will take time for individuals to adjust to new cost realities for goods and services compared to three years ago.
The study found varying responses based on income and education levels. Higher-income and better-educated respondents were less likely to perceive recent price increases or worry about future ones. Conversely, around 45% of those who believed prices had increased reported feeling stressed about it in recent surveys.
Households have increasingly turned to borrowing from family members or using savings accounts for their spending needs. There is also a rise in credit card usage and loan-taking behaviors observed in 2023. Data from the Federal Reserve Bank of New York highlights growing credit card delinquency rates among people under age 40—a concerning trend if debt continues escalating.
Higgins pointed out that delinquency rates could lead to higher debt costs and negatively impact financial standings through credit scores if payments are delayed by more than 30 days.
Evangelist and Higgins examined stress related to price increases across different demographics including gender, age, race, income levels using survey data from December 2022 – October 2023. Their findings indicate heightened concern among Gen Xers and millennials due likely due familial obligations like child support or retirement planning.
Key variables affecting credit card usage included education level income brackets with millennials Gen Z being more reliant on such methods than older generations those middle ranges most prone turning these solutions compared lowest ends spectrum
Recent job loss emerged strongest predictor use coping strategies involving loans cards underscoring disparate economic experiences Evangelist concluded periods painful same way
Read full field note bostonfed.org
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