TD Bank survey: 87% of US consumers changing spending due to inflation

A recent TD Bank survey indicates that 87% of U.S. consumers are significantly altering spending habits due to inflation, with 29% cutting nonessential purchases and 19% seeking discounts, impacting all income levels. This shift is evident as groceries and gas dominate credit card spending, while 73% of Americans carry credit card debt, with 25% expressing significant concern. These findings suggest sustained pressure on discretionary consumer sectors, potential credit quality risks for lenders, and a continued consumer preference for value-driven financial products.

Analysis

A recent TD Bank survey reveals a significant and broad-based shift in U.S. consumer behavior driven by inflation, with 87% of respondents altering their spending patterns. This is not confined to lower-income brackets, as 84% of households earning over $100,000 have also made changes. The primary adjustments include a pullback in nonessential purchasing by 29% of consumers and an increased focus on discounts by 19%, signaling pressure on the consumer discretionary sector. Spending is concentrating on staples, with groceries (46%) and gas (13%) representing the largest credit card expenditure categories. This trend is underscored by the high prevalence of consumer debt; 73% of Americans carry a credit card balance, and a notable 25% of this group express significant concern over their debt levels, flagging potential future risks for credit quality among unsecured lenders. While the overall economic outlook is split (40% optimistic vs. 38% pessimistic), consumer preferences for credit products are clear, with a focus on rewards (35%) and low interest rates (23%), suggesting a competitive advantage for financial institutions that cater to this demand for value.

Key Decisions for Investors

• Investors should consider re-evaluating exposure to consumer-facing sectors, potentially favoring consumer staples over discretionary goods and services given the reported cutbacks on nonessential spending.
• The data showing 73% of consumers hold credit card debt, with a quarter of them significantly concerned, warrants close monitoring of delinquency rates and loan loss provisions for financial institutions with heavy exposure to unsecured consumer credit.
• The strong consumer preference for rewards and low-interest credit cards suggests that card issuers with compelling value propositions and cash-back programs may be better positioned to attract and retain customers in a tight budgetary environment.