These are some of the ways Americans are adjusting to rising inflation

A customer shops at a grocery store in San Rafael, California on June 8. Inflation has risen to its highest level in almost 40 years, and Americans are having to adjust some of their spending habits.

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A customer shops at a grocery store in San Rafael, California on June 8. Inflation has risen to its highest level in almost 40 years, and Americans are having to adjust some of their spending habits.

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Clay Watkins loves LaCroix sparkling water — especially the watermelon flavor.

So the schoolteacher in suburban Chicago was thrilled when he saw it on sale at his local grocery store: two packs for $8.

“I went to get the package and I was like, ‘Wait a minute,'” recalls Watkins.

He was surprised to find a packet that once contained 12 cans of mineral water had been shrunk to 8 – with no change in price – a common practice known as “shrinkflation”.

“I’m not a mathematician,” he says. “I teach science. But I think that’s a 33% price increase.”

Frustrated, Watkins shelved the LaCroix water and fired off a tweet. He later bought private label sparkling water at Trader Joe’s for 79 cents a liter.

Many people are faced with much more painful choices as inflation hovers near a 40-year high.

The Labor Department said on Friday that consumer prices in May were 8.6% higher than a year ago – the biggest rise since December 1981. Prices rose 1% between April and May, led by hikes in gasoline, food and retail Rent.

Shoppers, who have swallowed price hikes for much of the pandemic without batting an eyelid, are now starting to blink as gasoline prices have topped $5 a gallon across much of the country and food prices continue to soar.

Cut back – except with a beloved pet

“The war in Ukraine — February, March — was the turning point,” says KK Davey, who tracks buyer behavior at market research firm IRI.

Davey says since the Russian invasion of Ukraine pushed up gas prices, even middle-income consumers have started to resist price hikes. They are increasingly turning to discounters and opting for cheaper generics.

A customer prepares to pump gas into her car at a gas station in San Rafael, California, May 20. Rising gasoline prices have been a major pain point for many household budgets.

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A customer prepares to pump gas into her car at a gas station in San Rafael, California, May 20. Rising gasoline prices have been a major pain point for many household budgets.

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Joanne Lee now buys regular eggs, not the more expensive free-range eggs she prefers. She also traded in her salad toppings.

“There is a certain crouton that I like. But that’s about $1.50 more than the generic Kroger brand, so I switched,” says Lee. “They’re not bad. But they don’t have the quality I usually like.”

However, Lee, who lives in West Lafayette, Indiana, doesn’t compromise when it comes to her dog, Potato. The golden doodle still gets brand name pet food.

“She was still spoiled,” Lee says, laughing. “She eats the most expensive food of all of us.”

Still, many are willing to splurge for meals and travel

Davey says it’s not uncommon for shoppers to skimp on some items while splurging on others. You might try to stretch a tube of toothpaste or a bottle of ketchup longer, but when products like toilet paper or baby formula are in short supply, price doesn’t matter.

“If you have to have it, you have to have it,” says Davey.

While consumers watch their money at the gas station and grocery store, they still open their wallets to expensive restaurant meals, airline tickets and hotel rooms. Total consumer spending has grown faster than inflation every month this year.

When it comes to travel and entertainment, many people make up for lost time.

“For this summer, there’s a mindset of, ‘We’re going on vacation and we’re not putting it off,'” says Wells Fargo economist Tim Quinlan. “While consumers are not happy about the prices, they are willing to pay them to have these experiences for a while.”

Spending, however, cannot last forever

But with inflation outstripping income, many people have to resort to savings to fund those expenses or put them on credit cards. The personal savings rate fell to a 14-year low in April, while revolving credit grew at an annual rate of nearly 20%.

Quinlan says the spending can stay afloat for a few months, but not indefinitely.

“On Labor Day, when all those credit card bills come due, everyone’s going to have a budget again. And so we expect growth to slow towards the end of the year.”

Travelers pass through Miami International Airport in Miami on April 22. Although many Americans are cutting back on some things, they continue to spend heavily on travel and eating out.

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Travelers pass through Miami International Airport in Miami on April 22. Although many Americans are cutting back on some things, they continue to spend heavily on travel and eating out.

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Ultimately, Quinlan said it will likely take a slowdown in consumer spending to bring prices back under control.

The Federal Reserve is working to speed this up by raising interest rates and making it more expensive for people to borrow money.

The Fed’s actions could help bring inflation down, but some fear they could trigger a recession.

And Watkins, the teacher who switched to cheaper soda when LaCroix became too expensive, knows that not everyone can easily adjust their spending.

Watkins volunteers at a pantry in the Chicago area, where he’s seen a huge spike in traffic over the past six months.

“The people who are really affected by gas prices and food prices are the people who don’t have a lot of leeway,” he says. “They don’t know where to cut.”

As prices continue to rise, more people may have to make difficult decisions about what to live without.

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