Concerns About Inflation and Interest Rates Increase to Highest Levels in Two Years Even as Majority of U.S. Consumers Remain Optimistic About Finances

Rhea-AI Summary

TransUnion's Q2 2024 Consumer Pulse study highlights that U.S. consumer concerns about inflation and interest rates have reached their peak in two years. Despite this, 55% of Americans remain optimistic about their finances, driven by stable employment and rising wages. The study, based on a survey of 3,000 adults, reveals that inflation in essential goods like groceries and gas is a top concern for 84% of respondents, a 5% increase from the previous year. Additionally, 46% are worried about rising interest rates. Young generations, especially Gen Z and Millennials, show the highest optimism about their financial future. However, 48% of consumers report that their incomes are not keeping up with inflation. More consumers are turning to credit, with 31% planning to apply for new credit or refinance existing credit within the next year, despite high interest rates.

Positive

• 55% of Americans remain optimistic about their finances.
• Stable employment and wage increases are driving consumer confidence.
• Gen Z (65%) and Millennials (64%) are the most optimistic about household finances.
• 31% of consumers plan to apply for new credit or refinance existing credit within the next year.
• 59% of those planning to apply for new credit will seek new credit cards, up from 53% in Q2 2023.
• Consumers hold over 543 million credit cards, indicating a high level of credit engagement.

Negative

• Concerns about inflation and interest rates are at a two-year high.
• 84% of consumers are worried about rising prices for everyday goods.
• 46% of consumers are concerned about rising interest rates.
• 48% of consumers report their incomes are not keeping up with inflation, up from 46% in Q2 2023.
• 31% of consumers do not agree that their incomes are keeping up with inflation, down from 33% a year earlier.
• High interest rates are deterring applications for mortgages, home equity lines, and personal loans.
• 80% of Gen Z and 77% of Millennials say rising interest rates will impact their credit applications.

Insights

Financial Analyst

The latest Consumer Pulse study by TransUnion presents a mixed yet intriguing picture for retail investors. While the data indicates that concerns around inflation and interest rates are at their highest levels in two years, it's notable that 55% of Americans remain optimistic about their household finances. This optimism, despite economic headwinds, can be attributed to low unemployment rates and continued wage increases. It suggests that while consumers are feeling the pinch, they believe in their ability to cope financially.

The significant takeaways for investors are twofold. Firstly, the increased concern over everyday expenses like groceries and gas, which jumped by 5% to 84% and interest rates, which also rose by 5% to 46%. These figures underscore the existing pressure on consumer spending power. The second point is the widening gap between those who believe their incomes are keeping up with inflation and those who do not. In Q2 2024, only 31% felt their incomes were keeping pace with inflation, down from 33% a year earlier.

For stakeholders, this could mean a likely shift in consumer behavior, potentially increasing reliance on credit products, as evidenced by the 59% of respondents planning to apply for new credit cards. While this may drive short-term gains for financial institutions, the long-term sustainability is questionable given rising debt burdens due to high interest rates.

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Market Research Analyst

The insights from the Consumer Pulse study also highlight generational differences in financial outlook. Gen Z and Millennials seem to be leading the optimism wave, with 65% and 64% respectively feeling good about their financial prospects over the next 12 months. However, the same groups are also the most sensitive to rising interest rates, with 80% of Gen Z and 77% of Millennials indicating that higher interest rates will impact their credit application decisions.

This information is important for businesses targeting these younger demographics, especially those in the financial sector. The increased interest in credit cards among these groups provides a potential opportunity for financial institutions to capture new customers. However, businesses should also be cautious as the burden of high interest rates might lead to higher default rates if the economic conditions do not improve. This dual dynamic presents both opportunities and risks.

Moreover, with 50% of respondents identifying inflation as their primary concern, businesses should be wary of consumer spending behaviors. Brands that can offer value-for-money products and services or flexible payment options may find favor in such an environment.

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TransUnion’s Q2 2024 Consumer Pulse study examines how youngest generations are most optimistic about finances despite the challenges they face

CHICAGO, June 12, 2024 (GLOBE NEWSWIRE) -- TransUnion’s (NYSE: TRU) newly released Q2 2024 Consumer Pulse study found that consumer concerns about inflation and interest rates reached their highest levels in two years. Despite these concerns, they come as 55% of Americans remain optimistic about their household finances over the next year – the same percentage observed in Q2 2022 and similar to a 57% reading in Q2 2023. This optimism appears to be, in large part, driven by confidence in a stable employment situation and continued wage increases.

When ranking their top three concerns affecting household finances for the next six months, the study found marked increases in concerns about inflation for everyday goods like groceries and gas (up 5 percentage points to 84%) and interest rates (up 5 percentage points to 46%) from one year ago. The newest Consumer Pulse study is based on a survey of 3,000 American adults that ran between April 29 and May 8, 2024.

“Consumers are facing distinct challenges when taking into account today’s high inflation and interest rate environment. From filling up a tank of gas to making a rental payment to buying groceries, most consumers are paying more today for everyday expenses than they ever have. And if they’re using a credit card to make these purchases, their interest rates are at much higher levels, so costs also are rising for those consumers carrying a balance,” said Charlie Wise, senior vice president and head of global research and consulting at TransUnion. “Despite these challenges, the majority of consumers remain optimistic about their finances. With low unemployment and healthy wage gains, consumers continue to feel good about their future prospects – with the youngest generations leading the way.”

Youngest Generations Most Optimistic About their Finances; Inflation Top Concern Across the Board

Generation	Percent of Respondents Optimistic About Household Finances in Next 12 Months		Percent of Respondents Rating a Specific Topic as One of Their Top 3 Concerns Affecting Household Finances in Next 6 Months
Overall	55%		Inflation (84%)	Housing Prices (47%)	Interest Rates (46%)
Gen Z	65%		Inflation (77%)	Housing Prices (56%)	Jobs (51%)
Millennials	64%		Inflation (82%)	Housing Prices (51%)	Recession (45%)
Gen X	47%		Inflation (85%)	Recession (50%)	Housing Prices (47%)
Baby Boomers	49%		Inflation (90%)	Interest Rates (54%)	Recession (43%)

Diving deeper into inflation concerns
One of the clearest data points from the Consumer Pulse study is that inflation is by far the greatest challenge facing consumers. Half of all respondents (50%) said inflation is their No. 1 concern, with the next highest worry being housing prices (rent or mortgage) – chosen by 13% of respondents.

The study points to a widening gap between those who say their household incomes are keeping up with inflation versus those who say their incomes are not keeping up. In Q2 2024, 48% of consumers said their incomes were not keeping up with inflation – up from 46% in Q2 2023. At the same time, just 31% agreed or strongly agreed that their incomes were keeping up with inflation – down from 33% one year earlier.

Why is inflation such an issue? Consumers pointed to a number of areas where rising prices are of particular concern, including groceries (84%), gasoline for cars (66%) and utilities (55%). The largest quarterly increases in rising price concerns between Q1 and Q2 2024: gasoline for cars (up 11 percentage points) and dining out, take out and meal delivery (up 7 percentage points).

“As the cost of living continues to increase, we are seeing clear behavioral changes, with those being ‘inflation concerned’ more likely to cut back on discretionary spending and cancel subscriptions or memberships, while also being more likely to turn to credit cards to help them through these challenging times,” said Wise.

Impact on credit demand and usage
Turning to credit during times of elevated inflation and high interest sets up an interesting dynamic. Some consumers are in need of more credit to manage their growing expenses, but high interest rates could potentially add more to their debt burdens if they do not pay off their credit products in a timely manner.

The Consumer Pulse study shows that in this dynamic, consumers’ appetite for new credit is winning. Of the 31% of consumers in Q2 2024 who said they plan on applying for new credit or refinancing existing credit within the next year, 59% said they’ll apply for new credit cards in that time period, up from 53% in Q2 2023. As of Q1 2024, consumers hold more than 543 million credit cards – by far the most popular credit product.

The increased interest in credit cards comes at the same time more consumers are worried about high interest rates. Nearly two in three consumers (65%) said rising interest rates will moderately or highly impact whether or not they apply for credit in the next 12 months. As well, the percentage of consumers who said they planned to apply for a mortgage, home equity line or personal loan – credit products that are highly sensitive to interest rates – have all dropped materially from prior year levels.

The youngest generations are the most concerned by rising interest rates as it relates to new credit products: 80% of Gen Z and 77% of Millennials said rising interest rates will moderately or highly impact whether or not they apply for credit in the next 12 months. The impact is not as significant for older generations – Gen X at 67% and Baby Boomers at 41%.

“When historians look back at this time years from now, it will be clear to them that the dynamics at play in the current credit market are a direct reflection of the inflationary and high interest rate pressures consumers face today. In our view, the far majority of consumers are meeting the challenges they face today – aided by a strong employment picture. What portends for the remainder of 2024 and into 2025 will likely be dictated by three things: the employment situation, interest rates and inflation,” concluded Wise.

For more information about the Consumer Pulse study, please click here. To learn more about inflation and its impact on credit, click here.

About TransUnion (NYSE: TRU)

TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good^® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world.

http://www.transunion.com/business

Contact	Dave Blumberg TransUnion
Email	david.blumberg@transunion.com
Telephone	312-972-6646

FAQ

What did TransUnion's Q2 2024 Consumer Pulse study reveal about inflation concerns?

The study revealed that 84% of consumers are concerned about rising prices for everyday goods like groceries and gas, a 5% increase from the previous year.

What percentage of Americans remain optimistic about their finances according to the study?

The study found that 55% of Americans remain optimistic about their household finances over the next year.

How are rising interest rates affecting consumer behavior according to the Q2 2024 Consumer Pulse study?

The study shows that 46% of consumers are concerned about rising interest rates, and nearly two-thirds said it will impact their credit applications.

What is the impact of inflation on consumers' incomes as per the Q2 2024 Consumer Pulse study?

48% of consumers report that their incomes are not keeping up with inflation, up from 46% in Q2 2023.

What trends in credit usage did the Q2 2024 Consumer Pulse study identify?

The study found that 31% of consumers plan to apply for new credit or refinance existing credit within the next year, with 59% aiming to get new credit cards.

How do younger generations feel about their financial future according to the study?

Gen Z (65%) and Millennials (64%) are the most optimistic about their household finances, despite concerns about inflation and interest rates.