As PYMNTS Intelligence’s own reporting on the perceptions surrounding inflation shows, roughly three-quarters of consumers have been cognizant of the impact of price increases from their favorite eateries.  The pinch is apparent with table service restaurants and quick-service outposts, and the read across is that delivery apps are denting consumers’ wallets, too.

The PYMNTS Intelligence data comes in the wake of retail sales data that show that spending on food services and drinking places was up about 0.3% in June, down from the previous month’s 0.4% rate.

Feeling the Pinch

It’s conventional wisdom to say that restaurants such as McDonald’s are at least somewhat recession proof, and that consumers will keep spending there, but as we detailed at the end of last month, the company’s comparable sales in the United States were down 0.7%. Consumers are trading down, management said on the company’s conference call. We’ll get some more incremental data on casual dining trends later this week, when Brinker International is set to report earnings.

Separately, Uber noted in its most recent earnings call that delivery revenues were up 17% year over year, which is a steady state growth rate that has been seen through the past several quarters. Uber’s website details that delivery fees, local operating fees and a dime paid for “marketplace services” are part of the equation as are courier fees in New York and California. Delivery fees are 15% of the order’s subtotal, and small order fees are $2 on orders under $10.

PYMNTS found headed into the end of the quarter that, as discussed in “Tipflation Is Changing Spending Habits of 1 in 6 Consumers,” consumers across all income groups are cutting back on spending due to tips driving up the cost of goods and services. Data showed that 29% of consumers say tipping has gotten out of hand as it seems they are universally being prompted at the point of sale to sign off on some level of suggested tipping. A full 17% of respondents to our surveys said that they have actually cut back on spending on items — including food and delivery — because the tipping aspect makes things cost too much.

The pullback is real. Consumers living paycheck to paycheck with issues paying bills have felt that prices at sit-down restaurants have soared by 32%. The perceived price hike drops to an estimated 17.3% for those consumers without issues paying bills but who still live paycheck to paycheck.

Almost all consumers in those brackets have taken actions to offset the pricing trends, which includes trading down or simply not dining out as often. Perception is everything, as they say, and right now, the tips, the fees, the surcharges and the sticky inflation are giving once-stalwart diners a bit of indigestion.

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By the Numbers

The latest installment of PYMNTS Intelligence’s series “New Reality Check: The Paycheck-to-Paycheck Report,” the “How Consumer Perception of Inflation Forces Many to Trade Down” edition, draws from a survey of more than 2,800 U.S. consumers in July. The study examines how price increases are impacting spending across a range of categories, among other matters.

The results reveal that consumers who are struggling to pay their monthly bills are cutting back on restaurant dining even more so than on retail or grocery purchases.

Specifically, 98% of those who live paycheck to paycheck with issues paying bills said they have taken actions to cope with price increases when purchasing from restaurants. Ninety-five percent of those who live paycheck to paycheck without issues paying bills said the same, as did three-quarters of those who do not live paycheck to paycheck.

Meanwhile, 97%, 92% and 73%, respectively, said they have taken actions to cope with inflation for retail product purchases, and 96%, 94% and 72% said the same of grocery products.

The Data in Context

Indeed, the world’s largest restaurant companies are seeing consumers around the world take belt-tightening measures such as reducing their frequency and trading down to lower-cost products.

Starbucks, for instance, shared in its most recent earnings that  global comparable store sales decreased 3%, driven by a 5% drop in transactions in spite of a 2% rise in average ticket size, as North American comparable store sales dipped 2%. Yet the company’s grocery brands performed well.

“We are operating in a challenging consumer environment. You see the impact of that in away-from-home consumption,” CEO Laxman Narasimhan said on the company’s earnings call. “If you look at our business at home, [however,] the grocery stores with our brands, you’re seeing volume increase.”

McDonald’s, too, noted the difficult consumer environment in its latest financial report, also seeing sales decline slightly.

“Beginning last year, we warned of a more discriminating consumer, particularly among lower-income households,” CEO Chris Kempczinski said on the company’s recent earnings call. “And as this year progressed, those pressures have deepened and broadened. … Industry traffic has declined in major markets like the U.S., Australia, Canada and Germany.”

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Online booking platforms, airlines, hotels and other companies in this sector have noted this trend during recent earnings calls, Reuters reported Thursday (Aug. 8).

Some have warned investors that they expect U.S. bookings to be flat in the current quarter, according to the report.

Hilton Worldwide said Wednesday that it is seeing U.S. demand slowing, with leisure travel “very, very low,” because consumers have less disposable income, per the report.

Another hospitality company, Marriott, said softer demand in North America contributed to the company’s lowering its forecast for growth in room revenue, according to the report.

The Walt Disney Co. said Wednesday that it has seen weakness in its parks division, per the report.

Online booking platforms Airbnb and Booking Holdings both said they have seen slower growth in the U.S., with consumers selecting lower-priced options or waiting longer to book their trips, according to the report.

Similarly, short-term rental management platform Beyond said people are booking trips closer to the travel date, when they’re sure they’ll have the funds they need, per the report.

This news comes at a time when the economy has seen a stock market rout and mounting recession fears, as PYMNTS reported Monday (Aug. 5).

The latest economic data on employment suggested that households could look to tighten their belts further.

For example, The Conference Board reported Monday that the Employment Trends Index decreased in July to 109.61, from an upwardly revised 110.58 in June.

Mitchell Barnes, economist at The Conference Board, said when announcing the data that: “July’s decline in the ETI is consistent with the normalization that is occurring across labor market metrics, including the ongoing moderation of payroll gains.”

It was reported Wednesday that Resy, a restaurant reservation platform owned by American Express, sees no evidence of a weakening of consumer sentiment among its customers, as demand for restaurant dining remains strong.

Conversely, Laws Whiskey House said alcoholic beverage brands are seeing current economic pressures dampen enthusiasm for beer, wine and spirits delivery as consumers begin to focus on cost rather than convenience.

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By the Numbers

PYMNTS Intelligence’s “How the World Does Digital” study surveyed more than 67,000 consumers across 11 countries accounting for nearly half the world’s GDP about their digital habits.

The results revealed that 15% of consumers use online grocery subscriptions each week, with that share nearly doubling to 28% for Gen Z. Similarly, a comparable 25% of millennials engage with these services each week. In contrast, only 12% of Generation X and just a 4% share of baby boomers do the same.

As such, Gen Z consumers are 10% likelier than millennials, 133% likelier than Gen X and a whopping 525% likelier than boomers to take advantage of these services.

The Data in Context

Businesses are increasingly trying to capture consumers’ grocery subscription spending. In April, Amazon revealed the rollout of a new service available at over 3,500 locations across the U.S. The service offers unlimited free grocery delivery on orders over $35 to Prime members for an extra $9.99 per month, while Electronic Benefits Transfer (EBT) recipients can subscribe for $4.99 per month.

“For customers who prefer to purchase their groceries more regularly — whether ordering delivery or pickup — this new grocery benefit will save them even more time and money on our vast selection of nearly 100,000 grocery items,” Tony Hoggett, senior vice president of worldwide grocery stores at Amazon, commented at the time.

In March, Target launched its new Target Circle 360 paid membership, offering free same-day delivery from the retailer’s on-demand delivery aggregator Shipt, which includes grocery merchants, as well as free two-day shipping from Target.

“The new Target Circle experience was designed to flex and grow with our guests to deliver more value and ease — no matter how they choose to shop with us — so every visit feels personal, rewarding and made just for you,” Cara Sylvester, the retailer’s executive vice president and chief guest experience officer, said in a statement.

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By the Numbers

The new PYMNTS Intelligence special report “Generation Zillennial: Voice Assistants and GenAI” draws from a survey of more than 2,700 United States consumers, examining different generations’ examines preferences and behaviors surrounding various artificial intelligence (AI) technologies.

The results revealed that only 14% of consumers across generations would like to have a voice-activated AI assistant for in-store shopping that fills a cart and arranges for same day delivery. Even younger shoppers, who tend to be quicker to adopt digital technologies, are not interested. Only 19% of Generation Z consumers, 20% of zillennials (the microgeneration between Gen Z and millennials) and 19% of millennials expressed interest.

The Data in Context

Overall, many consumers are open to voice AI in shopping. The 2024 edition of PYMNTS Intelligence’s “How the World Does Digital” report, which drew from a survey of 67,000 consumers across 11 countries, revealed that 18% of the sample uses voice technology to shop at least once a week. Plus, 16% pay using the technology with the same frequency.

Adoption is particularly high among these younger generations. Thirty percent of Gen Z consumers and 28% of millennials reported shopping via voice technology weekly, and 30% and 26%, respectively, pay.

In a March interview with PYMNTS, Cerence CRO Christian Mentz highlighted that the latest AI models’ contextual awareness and natural language processing (NLP) have transformed voice capabilities. These have evolved from merely providing information to delivering a more intuitive, human-like experience.

“Customers can actually have a much more conversational interaction with their … devices,” Mentz said. “[Conversational AI is] becoming much less of a task master, but you can interact with the system in a more natural, conversational way.”

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By the Numbers

PYMNTS Intelligence’s 2022 Decoding Consumer Affinity study drew from a survey of more than 2,000 United States consumers to get a sense of the factors that motivate their shopping behaviors and decisions.

The study found that, when buying pharmaceutical products, 61% of consumers said they are more loyal to products than merchants, while only 20% are more loyal to merchants than products and the remaining portion of consumers are equally loyal to each.

When it comes to grocery, however, the drivers of where to shop are very different. Fifty-three percent of grocery customers stated that they are more loyal to merchants than products, while only 35% said the reverse and just 12% were equally loyal to merchants and products.

The Data in Context

The stark contrast in consumer loyalty between pharmaceutical and grocery shopping reveals a fundamental difference in how consumers prioritize their purchasing decisions. In the pharmaceutical sector, the high loyalty to specific products suggests that efficacy and trust in the brand play a crucial role in driving repeat purchases, overshadowing the influence of the retailer.

In an effort to get consumers to be more loyal, CVS, for its part, upgraded its rewards program earlier this year.

“We heard from some of our members that they found value in our loyalty programs, but that the multiple programs could be hard to manage. So, we’ve been on a journey to combine what was at one point four different programs into a single program with two tiers,” Zach Dennett, vice president of loyalty, omnichannel and Hispanic formats at CVS Health, told PYMNTS in January.

Conversely, the grocery sector’s higher merchant loyalty indicates that factors such as convenience, store experience, and overall service quality are paramount, influencing where consumers choose to shop.

Grocery giant Kroger noted increased customer loyalty on its most recent earnings call following its efforts to personalize its messaging to omnichannel shoppers.

“Personalization enables us to balance the depth and breadth of our promotions more effectively and encourages customers to engage more with us by focusing on promotions that matter most to them,” CEO and chairman Rodney McMullen noted. “This led to an 18% increase in digital coupon clips compared to last year. Capturing more digital households is a key to our long-term growth model as these households are more loyal, spend nearly three times as much with us, and drive our alternative profit businesses.”

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The observation is grounded in truth, given the fact that consumer spending accounts for roughly 70% of GDP.

But we’re witnessing the emergence of the “cautious consumer,” as tracked through PYMNTS Intelligence’s data, and as relayed through various economic reports.

As of this writing, stocks are swooning, down more than 2%, on Friday (Aug. 2). The labor market is cooling, and the unemployment rate is up. Wage growth, though positive, has not been enough to really give a tailwind to disposable income.

The chart below details the trend: Real disposable income, adjusted for inflation, turned negative amid soaring prices through 2022. Now that inflation’s abated a bit, real incomes are growing, though at a muted pace, roughly 1% year over year, where that rate had been in the mid-single digit percentage points at this time a year ago.

As the growth has slowed, the savings rate as a percentage of disposable income now stands a bit about 3%, having come down from about 5% a year ago. In the meantime, PYMNTS has found that consumers are depleting their savings every few years. If savings are depleted and the savings rate is relatively low, building up those cash reserves takes longer … and longer.

The indebtedness level of the U.S. consumer doesn’t help matters, particularly given the hump in card debt being carried across all income levels, and particularly for paycheck-to-paycheck consumers, as seen below.

Consumer have been cautious since the beginning of the year, as PYMNTS found that at the time, 55% of shoppers earning less than $50,000 annually and 57% of those earning $50,000-$100,000 switched to cheaper merchants due to price increases of retail products. Even higher-earning shoppers are making such sacrifices, with 45% of those who earn more than $100,000 a year doing the same.

The sentiment factor should not be discounted here. The University of Michigan’s monthly consumer sentiment survey noted last week that there’s a “wealth gap” when it comes to the outlook on what’s to come, as individuals who own stocks tend to feel relatively better off than those who do not.

“Consumers with the largest stock holdings have seen a 71% increase in sentiment since June 2022, in contrast to only an 11% gain for those without stocks,” per the survey.  The recent volatility — and new downdrafts — in stocks might change the sentiment of consumers with much of their wealth tied up in portfolios.

The Conference Board’s Present Situation Index, which evaluates current business and labor market conditions, dropped to 133.6 from 135.3, indicating that consumers perceive the present economic situation as slightly deteriorating from a month ago.

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Confidence Ekes Upward

The Conference Board Consumer Confidence Index rose modestly in July, signaling mixed sentiments among U.S. consumers. The index increased to 100.3 from a revised 97.8 in June. This uptick, however, masks underlying concerns. The Present Situation Index, which evaluates current business and labor market conditions, dropped to 133.6 from 135.3, indicating that consumers perceive the present economic situation as slightly deteriorating.

Conversely, the Expectations Index, reflecting consumers’ short-term outlook for income, business and labor market conditions, climbed to 78.2 from 72.8 in June. This figure remains below the 80-point mark, often viewed as a recession indicator.

Dana M. Peterson, chief economist at The Conference Board, highlighted that while confidence improved, it stayed within the limited range observed over the past two years.

“Even though consumers remain relatively positive about the labor market, they still appear to be concerned about elevated prices and interest rates, and uncertainty about the future; things that may not improve until next year,” Peterson noted.

In July, younger consumers under 35 and those 55 and older showed increased confidence, whereas the 35-54 age group exhibited a decline. Income groups displayed no clear trend, though those earning over $100K maintained the highest confidence on a six-month moving average basis, with a narrowing gap compared to other income groups.

Consumers’ assessment of the current labor market showed slight pessimism, with fewer respondents believing jobs were plentiful and more viewing them as hard to get. Short-term business conditions were seen more optimistically, with a higher percentage expecting improvement and fewer anticipating worsening conditions.

Inflation expectations held steady at 5.4% for the next 12 months, while expectations for rising interest rates fell to 50.3%. Notably, optimism about the stock market increased, with nearly half of the respondents expecting stock prices to rise.

Consumers reported plans to reduce spending on discretionary services such as gambling and personal travel, favoring less expensive options like streaming over movie outings. Despite these cutbacks, non-discretionary expenditures, including healthcare and motor vehicle services, remained priorities.

This month’s survey underscores the cautious optimism among consumers, tempered by ongoing economic challenges and uncertainties.

Or Is Sentiment Slipping?

Conversely, data from the University of Michigan’s Index of Consumer Sentiment show a decline. The findings reveal a 2.6% dip in July compared to the previous month and a 7.1% decrease compared to the previous year. The Index of Consumer Expectations, meanwhile, dropped 1.1% month over month but actually rose slightly — 0.7% — year over year.

“Consumer sentiment has remained virtually unchanged in the last three months. July’s reading was a statistically insignificant 1.8 index points below June, well under the margin of error,” the university’s Surveys of Consumers Director Joanne Hsu commented. “Sentiment has lifted 33% above the June 2022 historic low, but it remains guarded as high prices continue to drag down attitudes, particularly for those with lower incomes.”

The Bare Necessities

Indeed, lower-income consumers are seeing the vast majority of their earnings go toward covering their basic needs. PYMNTS Intelligence research reveals that consumers who make less than $50,000 annually spend 72% of their income each month covering food, monthly bills and housing, with the lion’s share going to the latter.

Furthermore, research from this month’s installment of the PYMNTS Intelligence study “New Reality Check: The Paycheck-to-Paycheck Report” reveals that roughly two-thirds of consumers live paycheck to paycheck, and nearly one in four consumers do so with issues paying their monthly bills.

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“The Last Transaction: Family Spending Habits Reveal Merchant Opportunities in Retail and Travel,” a PYMNTS Intelligence report, leverages data from a survey of over 2,700 U.S. consumers to analyze how retail and travel spending behaviors differ across various household types.

The results reveal that those who are married without children at home are spending the most on travel, and that spending has been the most resilient in the recent past. When surveyed this year, they said they had spent $620, on average, on travel services in the last month, down slightly from $634 last year but up considerably from $457 in 2022.

These figures were well above their single counterparts, who spent $246, $272 and $216, respectively. That is, for this year, single consumers without children at home are spending 60% less than their married counterparts.

Meanwhile, married consumers with children at home may not have the disposable income of their childless peers, having spent $326 on travel in the previous 30 days when surveyed this year, down from $361 in 2023 and $389 in 2022.

Single consumers with children at home spend the least on travel, perhaps because of the financial constraints that come with taking care of a family on just one income. They averaged $238, $257 and $290 in 2024, 2023 and 2022, respectively.

The Data in Context

Indeed, travel companies are feeling some of this pullback. On Thursday (July 25), American Airlines reported that, in spite of record second-quarter (Q2) revenue of $14.3 billion, net income nonetheless plummeted 46% to $717 million.

“Our current revenue performance is not where we want it to be,” CEO Robert Isom said. “We know we can do better, and we will rise to meet this challenge.”

Similarly, American Express shared on a call discussing its earnings released July 19 that, while travel and entertainment (T&E) spending rose 7%, there were areas of weakness.

“We did see some slower growth in certain T&E categories versus the prior quarter, such as in airline and lodging,” CFO Christophe Le Caillec said. “At the same time, growth in our largest T&E category restaurants remained strong.”

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By the Numbers

The recent PYMNTS Intelligence exclusive report “The Last Transaction: Family Spending Habits Reveal Merchant Opportunities in Retail and Travel” drew from a May survey of more than 2,700 U.S. consumers in conjunction with data from previous months to understand recent shifts in purchasing behaviors.

The results revealed that, at the time of the survey, consumers who are single with children in the household had spent, on average, $69 on retail products in the previous 30 days, down from $106 in April and $103 the month prior.

Meanwhile, among those who are married with children in the household, spending fell less in that month but more over a two-month period, averaging $90 in May versus $97 in April and $154 in March.

Those who do not have children in their household, meanwhile, have not shown the same downturn in spending. Consumers who are married without children at home had spent an average of $71 in the previous month in May, down slightly from $74 in April but up slightly from $70 in March. Those who are single without children at home averaged $90 when surveyed in May, up from $79 in April and $68 in March.

A Deeper Dive

In an effort to cater to these belt-tightening consumers, merchants are rolling out more generous deals. Walmart, for instance, recently had its “largest savings event ever,” Walmart Deals.

Plus, Amazon recently shared that it saw record-high participation in its Prime Day event, with outside reports noting that the company saw an 11% increase in spending over the two-day sale, reaching $14.2 billion.

“We love helping Prime members save money, and Prime Day is the ultimate celebration of the savings, selection, and convenience that Prime membership provides customers looking for shopping, entertainment, food delivery, and more,” Doug Herrington, CEO of Worldwide Amazon Stores, said in a statement.

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