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Tuesday, November 5, 2024

Price Perception: Survey Reveals Americans’ Wallets Feel Inflation is Double the Reality

How Americans Perceive Inflation
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Jon McDonald brings more than 15 years of journalism expertise to CardRates.com. Informing financial consumers about emerging trends and companies making an impact in the industry, Jon is most knowledgeable in the areas of budgeting, credit card rewards, and responsible credit use; he strives to bring that experience to readers worldwide. Jon has a passion for writing and editing, and his articles have appeared in publications produced by The New York Times.

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We deploy a step-by-step methodology to each piece of research we publish to ensure our studies offer complete coverage and meet our rigorous editorial standards.

The annual inflation rate currently sits at 2.5%. That’s actually the lowest it’s been in over three years. But does it feel that way to American consumers? 

When looking at your day-to-day expenses and income, are you feeling the pinch? Are you struggling to make ends meet where previously you always felt like your savings were growing? Or are you managing to save more now than you were before?

Regardless of the official figures, we wanted to know what Americans think the rate of inflation “feels” like. So we reached out to 3,000 consumers across the nation to find out exactly how they perceive it. 

Consumers Say They Feel Like Inflation is About 7.3%

Our survey found that the average perceived rate of inflation, according to respondents, was a hefty 7.3%. The results reveal some interesting insights throughout the states:

The top 5 states where respondents said inflation feels the highest:

  1. Maine – 8.6%
  2. Colorado – 8.1%
  3. Nebraska – 8.0%
  4. Connecticut – 7.8%
  5. Delaware – 7.8%

According to the survey, residents of Maine feel the hardest hit, with survey respondents stating that inflation feels like it’s sitting at 8.6%, despite the actual rate being far lower. Conversely, those who live in Kansas seem to be happier in their financial situations, with respondents stating that inflation feels like it’s sitting at 5.5%.

The bottom 5 states where residents perceive the rate of inflation to be the lowest:

  1. Kansas – 5.5%
  2. South Dakota – 5.7%
  3. North Dakota – 6.0%
  4. Wyoming – 6.0%
  5. Montana – 6.4%

When it comes to people’s confidence in the rate of inflation in 2025, it appears that the majority are not too hopeful, with 64% of respondents believing that inflation will likely increase over the next year. Many Americans are concerned about this, with 24% saying that they think about inflation as often as five times a month. Another 42% of respondents said they also consider inflation when making every financial decision.

Here is the full list:

StateInflation Percentage
Alabama7.5
Alaska7.0
Arizona7.6
Arkansas7.3
California7.1
Colorado8.1
Connecticut7.8
Delaware7.8
Florida6.8
Georgia7.1
Hawaii7.7
Idaho7.8
Illinois6.7
Indiana6.9
Iowa7.3
Kansas5.5
Kentucky6.7
Louisiana7.5
Maine8.6
Maryland6.9
Massachusetts7.0
Michigan7.7
Minnesota6.8
Mississippi7.3
Missouri7.7
Montana6.4
Nebraska8.0
Nevada7.4
New Hampshire7.0
New Jersey7.8
New Mexico6.9
New York7.2
North Carolina7.3
North Dakota6.0
Ohio7.4
Oklahoma7.7
Oregon6.7
Pennsylvania7.3
Rhode Island7.4
South Carolina6.9
South Dakota5.7
Tennessee7.4
Texas7.3
Utah6.6
Vermont7.5
Virginia6.9
Washington7.0
West Virginia7.5
Wisconsin7.5
Wyoming6.0

Despite this, the majority of Americans (76%) polled are optimistic that their current financial situation will improve in the next year.

Things People Would Cut Back On If Inflation Were to Rise

If inflation were to significantly increase, many Americans would need to make some lifestyle changes. But what exactly would people cut back on first? Here’s what our survey respondents said they could live without:

  • Dining out and entertainment: 38%
  • Travel and vacations: 30%
  • Subscription services (Netflix, gym memberships, etc.): 16%
  • Retail shopping: 16%

But it’s often the things that you don’t plan for that make the biggest impact on your financial situation. When questioned about what their biggest unexpected expense was to hit them this year, respondents cited the following:

unexpected expenses pie chart graphic
  • Higher-than-expected grocery or utility costs: 38%
  • Car repairs or maintenance: 36%
  • Home repairs or rent increases: 20%
  • Medical bills: 6%

Tips for Beating Inflation

When it comes to managing inflation, no one can predict what the future will bring, but there are some things you can do to future-proof your financial situation. Here are some inflation-beating tips you can employ to try and stay ahead of the game when it comes to your personal savings:

  1. Invest wisely: Choosing to place your money into safe securities will help you stay ahead of the curve. Talk to a financial advisor who will help point you in the direction of investments that produce a higher rate of return than interest rates.
  2. Take stock in yourself: Investing in yourself is also a good way to ensure financial success. Learning new skills and bulking up your résumé will ensure that you always stay hireable no matter the financial climate. Not only will you become an indispensable employee when times are tough but you may also find a wealth of new opportunities available to you.
  3. Create a budget: Inflation is often felt the most when looking at life’s luxuries. If you can cut certain ‘wants’ from your life and focus on budgeting for your needs, you should be able to save more when times are good. And, if inflation does increase, you may not feel it as much.
  4. Pay off your debts: The best strategy to beat inflation is to stay on top of your debts. Having multiple credit cards or loan balances that you need to pay back can be a real burden in times of increased inflation as these costs start to compound. Make extra payments when you can, and have some additional capital to spend to ensure you have a buffer on any accounts when the going gets hard.
  5. Diversify your investments: Putting all your eggs in one basket is never a good idea but particularly so in times of high inflation. Having all your savings in one place puts you at a high risk for exposure, so diversifying your assets is one way to ensure that you remain on top of inflation.

“Our survey demonstrates just how much of an impact the high levels of inflation over the past few years have had on Americans. So much so that, even if inflation has come down significantly, people still perceive it to be much higher than it actually is. By being more financially resilient with their personal finances, people can safeguard their financial positions going forward, even in the event of a rise in prices,” says Erica Sandberg, Consumer Finance Expert with CardRates.

Methodology

We surveyed 3,000 people selected from a geographically diverse, double opt-in online panel. We then refined this selection process to align with the specific criteria necessary for each distinct survey. To ensure accuracy, we craft our questions to thoroughly screen and verify respondents, matching them precisely with the survey’s target audience.

Our data collection process integrates a range of quality control methods. Beyond standard practices such as digital fingerprinting, bot detection, geo-verification, and monitoring response speed, each response is carefully reviewed by a dedicated team member for quality and contextual accuracy. We also pay close attention to open-ended responses, examining them for relevance and originality, and screen for any nonsensical or potentially plagiarized content.