Biden Sparks Recession Fear in 84% of Americans
More than 5 out of 6 (84%) Americans fear a recession is on the horizon this year
Significantly fewer U.S. consumers feel confident about their financial situation compared to last quarter
Due to recession fears, nearly 8 in 10 adults are making lifestyle changes, such as delaying large purchases on a house or car
74% say their concerns about inflation have increased
This quarter's BMO Real Financial Progress Index results found that Americans are growing increasingly concerned about rising consumer prices, inflation, and a potential recession. A total of 84% of Americans said they are concerned about a recession occurring by the end of the year. Over the past three months, nearly three quarters (74%) of Americans said their concerns about inflation have increased. More than 70% feel their financial momentum is threatened by higher grocery bills (78%) and the rising cost of gas (76%). In order to prepare for a potential recession, 76% of Americans said they are making lifestyle changes such as delaying large purchases on a house or car, paying down debt, and cutting back on holiday spending.
These findings are from the latest BMO Real Financial Progress Index, a quarterly survey conducted by BMO and Ipsos that measures Americans' sentiment around financial confidence. The survey was conducted from July 27 to August 29, 2022.
Concerns vary significantly by generation. Older Americans report feeling more concerned than younger generations. Between ages 55-64, 82% said their concerns about inflation have increased over the last three months, compared to 62% of those between aged 18-24 and 70% of those aged 25-34.
How Americans are preparing for a potential recession
Americans are not waiting to take action to improve their financial situations in the event of a recession. Nearly 8 in 10 Americans (76%) said they plan to adjust their lifestyles in response to recession concerns:
34% are delaying major purchases, like buying a new home or car.
29% are paying down debt.
28% are planning to cut back on holiday spending.
24% are allocating more income to savings.
14% are staying in a job they don't enjoy.
Financial Confidence and Security is Tumbling
U.S. adults report feeling significantly less financially secure compared to this time last year. A significant decline in confidence is also reported compared to last quarter.
Americans who report being "much more" financially secure decreased to 39% from 50% a year ago and 47% last quarter.
Americans who said they feel "much less" financially secure, rose to 27% from 16% in the same quarter a year ago.
The number of Americans who said they are making financial progress decreased to 54% from 62% a year ago.
More than 40% of Americans under age 35 do not have enough savings to cover an emergency.
"It's clear that Americans are feeling the weight of inflation with concerns of a recession in mind, and now, many are going so far as to put off their homebuying journey or buying a new car," said Paul Dilda, Head of U.S. Consumer Strategy for BMO Financial Group. "BMO's findings only underscore what we know is crucial right now - that everyone should look at their finances and develop a solid plan after talking with their banker or financial advisor. With the right advice and tools, people can continue to reach their financial goals and make financial progress through inflationary periods."
Best practices to help Americans manage through inflationary periods and economic downturn
Most Americans understand the importance of having a budget. However, there is room for improvement as the Index revealed 25% of Americans do not track financial progress. The number is higher among women (30%) compared to men (21%).
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