Households Cut Spending as Inflation Outpaces Wages: CNBC

American households are pulling back on spending and rotating toward discount and warehouse retailers as inflation once again runs hotter than paychecks, according to a new CNBC report.

What the data shows

Inflation is once again outpacing wage growth and eroding workers’ purchasing power. In August, consumer prices rose 3.4% from a year earlier, compared with 3.1% wage growth.

April of this year was a turning point, following the surge in gasoline and other energy costs after the Iran war began. American households are cutting back on spending as they shift toward discount and warehouse stores.

The consumer is stretched

Some 56% of Americans say everyday life has become less affordable over the past year, with many cutting back on dining out and groceries to stay on budget, according to the CNBC and SurveyMonkey Quarterly Money Survey.

About 39% say they have used a credit card to pay for groceries or other essentials because they could not otherwise afford them, according to the CNBC survey. That is the kind of behavior that shows up later in delinquency data at the card issuers.

Do you want to see how to make more plays? Do you want to find gains yourself?

Unusual Whales helps you find market opportunities through our market tide, historical options flow, GEX, and much, much more.

Create a free account here to start conquering the market with Unusual Whales.

Where the trade-down is showing up

42% of respondents say they are spending less on personal care services like haircuts and pedicures, while 22% report pulling back on gym memberships, 21% on alcohol and 14% on rideshares.

“A substantial number of Americans are worse off, their incomes are not keeping up with the price increases right now,” Heather Long, chief economist at Navy Federal Credit Union, told CNBC.

Why it matters for markets

A consumer that trades down is a headwind for full-price retailers, restaurants, and discretionary categories, and a tailwind for warehouse clubs, dollar stores, and private-label heavy names. It also complicates the Fed narrative if sticky services inflation keeps chipping at real wages.

Options market and stocks to watch

Watch for consumer-tape reactions across the following names:

• WMT: watch for continued share gains as shoppers trade down on groceries and essentials.
• COST: watch for traffic and renewal trends as households lean into warehouse value.
• TGT: watch for discretionary weakness relative to consumables mix.
• DG: watch for signs the low-income consumer is stabilizing or deteriorating further.
• HD: watch for softness in big-ticket renovation and appliance categories.

For more macro and consumer coverage, see other news on Unusual Whales.

Want more market intelligence? Create your free Unusual Whales account for options flow, market tide, GEX, and the full toolkit.