In the latest Pymnts Intelligence report, researchers found that most consumers say their income has not caught up with inflation. The report also revealed that the share of U.S. households living paycheck to paycheck was 63 percent in July compared to 62 percent in the same month last year.
And while the inflation rate dropped to 3 percent in the first half of the year from a July 2022 high of 9.1 percent, consumers continue to feel financial pressure. “As a result, from groceries to retail, many consumers are trading down,” the report’s authors said. “If they’re buying at all, many are buying cheaper or lesser quality alternatives.”
The report, titled “New Reality Check: The Paycheck-to-Paycheck Report,” is based on a survey of more than 2,500 U.S. consumers and was conducted from July 9 to July 18. The researchers identified several consumer personas who are more frugal and have shifted how and where they purchase products — which includes turning to off-price retailers for apparel and home goods.
The data also showed fluctuation within the living-paycheck-to-paycheck demographic. The report revealed that since July of last year, the share of households living paycheck to paycheck “with issues paying their monthly bills has increased 2 percentage points to a high of 23 percent” while the share of consumers living paycheck to paycheck without issues paying their monthly bills “is currently 40 percent — the same as July 2023 but a notable drop from 44 percent in May 2024.”
The report stated that this volatility ”suggests that consumers at the edges of each financial lifestyle may move back and forth between them.”
The data showed that paycheck-to-paycheck consumers, “especially those struggling to pay monthly bills, are the least likely to say their incomes offset inflation.” While 77 percent noted that their income did not or only somewhat offset inflation, just 16 percent of respondents said their income had fully offset inflation.
“Among those living paycheck to paycheck without difficulty, 70 percent say their income did not or only somewhat offset inflation, while 19 percent say their income fully offset inflation,” the report stated. “Even among those not living paycheck to paycheck, 61 percent say their income did not or only somewhat offset inflation.”
The researchers created four consumer personas based on their survey responses. “Bargain shoppers” are those consumers “who trade down by turning to cheaper merchants and plan their purchases around sales and discounts” while “quality compromisers” are shoppers who tend to trade down “by purchasing lower-quality items while shopping at similar merchants.”
And “conscious consumers” are those shoppers who trade down, and “supplement their purchases with community resources and focus on sustainability.” The “minimalists” are shoppers who tend to limit consumption “and often only buy necessities.”
And it is the bargain shoppers who are flocking to off-price retailers such as TJX Cos. and Ross Stores — brands that are seeing higher sales and earnings, and who have expanded their market share. Ross Stores, for example, has seen its revenue grow to $20.7 billion this year from $16 billion in 2020. The retailer has added more than 50 stores year-to-date and has more than 2,000 total stores.
TJX Cos. has seen its sales soar to $55.6 billion this year from $41.7 billion in 2020. The retailer has expanded its footprint in the U.S. and internationally, including a recent acquisition in Dubai. In its most recent quarterly call with investors, the company said it is on track to grow its base to 6,300 stores.
