Inflation Was Americans' Top Financial Setback in 2022. Will It Get Better in 2023?

Higher living costs have been hard on everyone. But will that situation persist?

It's not unusual to experience a financial setback in the course of the year. If you got hit with an unplanned bill at any point in 2022, you may have landed in credit card debt to cover it. Or, you may have lost your job for a period of time.

But this year, Americans on a whole experienced one massive financial setback -- inflation. Living costs have been extremely elevated since the start of the year, and that's forced a lot of people to rack up costly debt or raid their savings accounts just to stay afloat.

In fact, in a recent Fidelity study, inflation was cited as Americans' top financial setback in 2022. But will things ease up in 2023? Or are we in for another year of soaring living costs -- and loads of stress for consumers?

Some positive signs

We're closing out 2022 with inflation at a pretty high level, historically speaking. And so it's fair to say that Americans won't see much relief in that regard at the start of 2023.

But will things get better as the new year progresses? There's a good chance that they will.

First of all, inflation seems to have peaked, because for the past number of months, the Consumer Price Index, which measures changes in the cost of consumer goods, has consistently been showing smaller and smaller annual increases.

In fact, even the Federal Reserve is acknowledging that inflation is heading in the right direction. For much of the year, the Fed pushed aggressive interest rates to address the problem of inflation. But it recently pledged to slow down those rate hikes, which is a positive sign.

There are also some other positive data points to consider. Recently, Walmart CEO Doug McMillon said that inflation is easing in a number of key consumer spending categories, including toys and apparel. And while the latter is clearly more of a necessity than the former, all told, it's good news.

Finally, the Producer Price Index, which measures what businesses pay for goods before they reach consumers, rose 7.4% in November on an annual basis. But that's down from an 8.1% increase in October.

Patience is key

Clearly, there are signals that indicate that inflation may be cooling off. But those impacted by it will probably need to sit tight for at least a few more months until they're able to benefit from a notable downtick in living costs.

After more than a year of sky-high costs, the advice to be patient may not be welcome. But it's reflective of reality.

Living costs are apt to be high at the start of 2023, so consumers should continue to do their best to spend conservatively and, if possible, take steps to boost their income, like taking on side gigs as time allows. At some point, things are apt to get better. And ideally, by the end of 2023, we'll be in a place where basic expenses like food and utilities are not such an overwhelming burden for everyday Americans.