US personal finance ratings slide on rising prices

WASHINGTON, DC – Far fewer Americans today than a year ago rate their financial situation positively, and more say their finances are getting worse than they say they are improving. A record percentage cite inflation as the biggest financial problem facing their family. Meanwhile, about half say recent gas price increases have caused hardship for their families, well below what Gallup has measured at other times of rising fuel prices. The muted reaction to gasoline price increases may reflect the fact that Americans expect these changes to be temporary rather than permanent.

These results are from Gallup’s annual Economics and Personal Finance Survey, conducted April 1-19.

Americans more pessimistic about their finances

Forty-six percent of American adults, up from 57% last year, rate their financial situation as “excellent” or “good.” The current figure is the lowest since 2015, although slightly better than the trend lows recorded between 2009 and 2012, when just 41% rated their finances positively.

Additionally, 38% of Americans describe their financial situation as “just fair”, while 16% say it is “poor”. The latter figure is almost twice as high as last year’s 9%, although slightly lower than the 19% who reported it in 2009 and 2010.

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Meanwhile, 37% of Americans say their financial situation is improving and 48% say it is getting worse, a reversal from last year when the majority said their finances were improving. Current numbers are similar to what they were in April 2020 during the early stages of the coronavirus pandemic as well as during the Great Recession in 2008. In most years the question has been asked, Americans have been optimistic rather than pessimistic about the trajectory of their finances.

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Americans of all income groups rate their finances less positively than last year. Every major income group shows a drop of between 8 and 14 percentage points in positive ratings of their current finances. The decline in the percentage of middle-income Americans reporting that their financial situation is improving is about half that of low- and high-income Americans.

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A separate question in the survey reveals a more stable and less pessimistic assessment of personal finances – 67% of Americans say they have enough money to live comfortably, down slightly from 71% last year. The percentage of those who say they are financially comfortable has changed little since 2013, ranging between 66% and 71%. The clear outlier in the trend was a reading of 60% in 2012. However, before the Great Recession, seven out of 10 people said they had enough money to live comfortably.

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Inflation behind growing financial problems

Americans cite inflation as the most significant financial issue facing their family today, with 32% citing it in response to the open-ended question. That compares with 8% a year ago and is nearly double the previous record high of 18% inflation in 2008.

Beyond inflation, 10% of Americans cite energy costs or gas and oil prices. Mentions of gas prices were last as high in 2012 (11%) and reached 29% in 2008. Between 2014 and 2021, very few Americans said energy costs/prices gas were their most difficult financial problem.

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Inflation is the top concern this year among Americans of all income groups, but it’s mentioned more often by high-income households (37%) than by middle-income (32%) or low-income households. (27%). There are no significant differences by income group in mentions of energy costs.

Other common personal financial concerns this year among American adults are lack of money or low wages (11%), the cost of owning or renting a home (8%), healthcare costs (7% ) and over-indebtedness (7%). Health care costs and lack of money generally rank near the top of the list.

Gas prices are causing hardship for about half of the United States

Fifty-two percent of Americans say recent increases in gas prices have caused financial hardship for their household. Gallup has asked this question in the past when gas prices were rising. Significantly more Americans said they were financially harmed by rising gas prices in 2005, 2008 and 2011 than say so now. The highs were 72% in September 2005 and 71% in May 2008.

Americans are now more likely to say rising gas prices are causing them financial hardship than they were in 2000, 2001, 2003, 2004 and 2018.

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About one in seven Americans – 14% – say high gas prices have caused “severe hardship” for their household. This includes more than one in four American adults living in low-income households (26%).

Overall, 70% of low-income Americans say gas prices are causing them severe or moderate financial hardship. That compares to 51% of middle-income Americans and 35% of those residing in high-income households.

Majority think gas price increases are temporary

In general, Americans are less likely to say they are experiencing financial hardship due to rising gas prices if they believe gas price increases are temporary rather than permanent. Currently, 57% predict that the increase in gas prices will be a temporary change, while 42% expect it to be permanent. In other periods of rising gasoline prices, such as 2008, the majority believed the gasoline price increases were permanent and were more likely to say they were experiencing financial hardship as a result.

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In the current survey, 40% of Americans who think gas prices are temporary say the increases are causing them financial hardship. Of those who believe the price changes are permanent, 66% say they have been financially burdensome.

Republicans are one of the few subgroups to expect gas price changes to be permanent. A 57% majority of Republicans say so, but 55% of independents and 75% of Democrats predict the price increases will be temporary.

Consequences

The past two years have brought a series of economic challenges to the United States, including widespread economic lockdowns, high unemployment and a recession at the start of the pandemic. Although the economy has recovered since then, the rapid pace of recovery, strong consumer demand for products, a tight labor market and supply chain issues have contributed to the highest inflation rates. observed over four decades.

Nearly a third of Americans cite inflation as the biggest financial problem for their family, and half say rising gas prices are causing them financial hardship. These problems appear to be weighing on Americans’ financial outlook, with fewer Americans assessing their situation positively than a year ago and more saying it is getting worse.

Current personal finance ratings are similar, if not worse, to what they were during the widespread economic shutdowns around this time two years ago. The fact that more expect the gas price increases to be temporary, perhaps attributing the price increases to the Russian-Ukrainian war or, more generally, to the end of past gas price increases, may prevent Americans from evaluating their finances even worse than they are.

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