Introducing the monthly Consumer Inflation Pulse Check survey The UBS Evidence Lab conducted the first iteration of the US Consumer Inflation Pulse Check Survey focusing on the impact of inflation on consumer purchasing and debt repayment behavior. Given investor concern about consumer vulnerability to rising prices, we did isolate results from low- and medium-income respondents in our analysis. The bottom line: inflation is certainly impacting consumer wallets, with 62% of the 1,000 respondents spending more as a response to rising prices. Interestingly, in response to a question about how consumers were covering the increase in prices, where multiple responses were allowed, "cutting back on discretionary purchases", "using my income," and "using credit cards" were close in response popularity (chosen 46%, 40%, and 39% of the time, respectively), implying that consumer demand in mid- April remained strong as consumers found ways to fund price increases. This implies that the Fed is likely to retain its aggressive pace of rate hikes for the foreseeable future. Interestingly, credit card seemed to be a top repayment priority (ahead of mortgage, auto, other consumer debt), with student loans dead last.

Household income growth not quite keeping up Consumers were asked if their household income had increased enough to cover rising prices. About 61% of respondents did not report an increase in household income. Of those surveyed, 77% indicated that their income either did not rise or the wage increase was insufficient to cover higher inflationary spend. Surprising relative to headlines on low-income wage gains, lower-income respondents (under $20,000 in annual income) fared the worst, with 72% reporting no income increase and 89% citing no raises or insufficient household income growth to offset higher prices.

Inflation delaying big ticket purchases The survey looked into whether inflation was impacting big-ticket purchases such as for homes and for auto. Of those respondents planning to buy homes, 39% will "do so later than originally planned" and another 20% "don't plan to do this anymore" -- signaling further near-term pressure in residential mortgage originations. Auto was more interesting. There were more consumers surveyed that were planning to buy a car (68%) than a home (57%). Of those planning to buy a car, 42% are delaying. Meanwhile only 12% are cancelling plans to buy a car outright, well less than the 20% who are cancelling planned home purchases. This suggests potential near-term pressure in auto originations, but also supports the notion of continued pent-up demand.

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