Inflation Makes Shoppers Cut Back On Everything But Necessities

By
Diccon Hyatt
Diccon Hyatt
Full Bio
Diccon Hyatt is an experienced financial and economics reporter who has covered the pandemic-era economy in hundreds of stories over the past two years. He's written hundreds of stories breaking down complex financial topics in plainspoken language, emphasizing the impact that economic currents would have on individuals' finances and the market. He's also worked at The Balance, U.S. 1, Community News Service and the Middletown Transcript.
Learn about our editorial policies
Published April 28, 2023
A man walks past a grocery store on February 01, 2023 in New York City. Wages for workers in most major U.S. cities grew at a slower pace in the final three months of 2022, with inflation still outstripping pay for many workers.

Leonardo Munoz / Getty Images

People are spending more on gas and housing, and less on just about everything else. 

Consumer spending has been one of the economy’s bright spots as recession fears rise. It was a major reason the gross domestic product, a broad measure of the country’s economic output, grew instead of shrank in the first quarter of the year. 

However, a closer look at data released Friday by the Bureau of Economic Analysis reveals people cut back on all purchases outside necessities like food and housing in March.

"That is hardly the spending profile of a heedless consumer on a spending spree,” Tim Quinlan and Shannon Seery, economists at Wells Fargo Securities, wrote in a commentary. 

Rising wages in a labor market that still favors workers have been propping up spending, while still-elevated inflation and higher borrowing costs have been pushing in the opposite direction. The outcome of that tug-of-war will have a major impact on the economy, since consumer spending is the engine of economic growth, accounting for 68% of the total GDP.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

  1. Bureau of Economic Analysis. "Table 2.3.6U. Real Personal Consumption Expenditures by Major Type of Product and by Major Function."

  2. Wells Fargo Securities. "Ongoing Pivot to Income as Main Driver of Spending."

Take the Next Step to Invest
×
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
Service
Name
Description