Inflation has sapped Americans' financial security, Federal Reserve finds
Americans' sense of economic security deteriorated sharply in 2022, with more than a third of adults saying they were worse off financially than a year prior, the Federal Reserve said Monday.
The findings, outlined in an annual survey on people's economic well-being, underlines the severe hardship caused by scorching inflation. Higher prices continued to hurt most households last year, with 73% of adults reporting that they were staying afloat, down from 78% in 2021.
More troubling, 35% of those polled said their financial situation deteriorated last year — the highest level since the Fed started asking about people's well-being in 2014. The survey of more than 11,000 was conducted in October 2022.
Although inflation has cooled since peaking last June, prices remain well above the Fed's target annual rate of 2%. The consumer price index — a broad basket of goods and services — rose in April at an annual rate of 4.9%. Core inflation, which excludes volatile energy and food costs, increased at a 5.5% rate.
Roughly two-thirds of adults stopped using a product or used less of it because of inflation, while 64% switched to a cheaper item, the Fed found.
One clear barometer of Americans' financial fragility, according to the survey: Only 63% of those surveyed said they had enough cash to cover an emergency $400 expense, down 5 percentage points from 2021. Of that total, 18% said the largest expense they could handle with savings was $100.
More people also described having a harder time putting money away for retirement: 31% of those polled last fall said their savings plan was on track, down from 40% the previous year.
A recent survey by Bankrate found that more than half of those polled said that factors including inflation, rising interest rates and unstable income are hurting their mental health.