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People have started cutting down on expenses they don’t need and you might be surprised to learn that it isn’t because of inflation

Inflation is one of the biggest problems in the world with the majority of it affecting third-world countries. But, that certainly does not mean that first-world countries are not at all affected by it. inflation is at an all-time high in the United States too.

According to new data released on Friday by Commerce Signals which is a TransUnion Company, they analyzed how inflation can and does affect the spending of the people.

People generally send in two groups discretionary and non-discretionary items. Discretionary items are the things that one buys with the amount of money that has been left after spending on non-discretionary items like utilities or groceries. So, in other words, discretionary items are non-necessary items like entertainment, etc., and non-discretionary items are the necessities of life.

According to the data, due to the current inflation people have started cutting back on things such as electronics and subscriptions. The data showed that there had been only a 13% increase in the amount of money spent on discretionary items in July, in contrast with a 16% increase in the amount of money being spent on non-discretionary items.

However, while many people believe that all these decreases in consumer spending are because of Inflation, but that is not the case at all as the two are related but not the cause of each other. According to Nick Mangiapane who is the CMO at Commerce Signals, purchases at food and grocery stores have gone up by 13%. Out of that 13%, 10% are from increased transactions, and only 3.5% is from the actual price of the item.

In simpler words, Commerce Signal’s data says that the amount of food purchases has only risen by 3.5% but, the data released by the federal government says that it rose by 13%, which leads us to the conclusion that people are trading down. An example can be that when looking for food to take out, people are choosing Hamburgers instead of steaks.

What exactly does trading down mean you might be asking? Well, trading down means to replace a product just because the first one was too expensive. So, it means that consumers are replacing the products they use with cheaper versions of them.

The good news is that while people have started becoming a bit choosy about the products they use and their brands, consumer spending is not declining at all. If this continues the more high-end brands might be in profit more than their middle counterparts.


H/T: MarketingDaily

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