By Jonnelle Marte

(Reuters) – U.S. households expect that their monthly spending will grow beyond pre-pandemic levels, however people are decreasing their willingness to spend big for vacations. This is a signal that more households might be concerned about rising costs. According to a New York Federal Reserve survey Monday.

According to the survey, consumers are likely to spend more money on their daily living expenses over the next year. However, it showed that people are less likely to spend large sums of money on vacations or home repairs.

Researchers wrote that households reported a less likely likelihood to make large purchases in the following four months. This points out the potential contribution of higher inflation expectations.

U.S. consumer prices are rising https://www.reuters.com/world/us/us-consumer-prices-increase-strongly-december-2022-01-12 at the fastest clip in nearly four decades because of snarled supply chains and other disruptions related to the COVID-19 pandemic. Inflation is hurting wage growth and increasing expectations of the Federal Reserve raising interest rates by March, and then shrinking its balance sheets later in the year.

The December survey results showed that respondents expect household spending to increase by an average of 4.6% in the coming year. This is up from 4.2% in August. In the next year, spending on essentials will rise by 5.4%.

The survey revealed that consumers are being more cautious with spending. Consumer spending on leisure items such as hobbies and vacations is expected to increase slowly over the coming year. The median growth in December was 2.5%, down from 2.6% in August.

While the percentage of households that made substantial purchases during the past four months declined to 58.1%, it was still higher than August’s 62.6%.