Consumer Spending Holds Strong As Americans Draw Down Savings Amid Rising Costs
Americans continued to spend at a steady pace through the spring, helping support economic growth and hiring even as higher prices for fuel, groceries and other essentials placed increasing strain on household finances.
Consumer spending, which accounts for roughly two-thirds of U.S. economic activity, rose 0.5% in April following a stronger gain in March. The spending increase came despite a surge in energy prices following the Iran war, which pushed gasoline costs sharply higher across the country and increased transportation expenses for consumers and businesses alike.
The resilience in consumer spending has helped support the labor market. The leisure and hospitality sector added 70,000 jobs in May, one of the strongest monthly gains recorded by the industry in more than a year. Retail sales have also remained relatively firm, with major chains including Walmart, Home Depot, Macy’s, Dollar General and Five Below reporting stronger-than-expected sales results in recent earnings reports.
At the same time, economic data show that many households are relying less on savings to maintain their spending habits. According to figures cited by The Washington Post, the personal savings rate fell to 2.6% in April, the lowest level in nearly four years and among the weakest readings since the aftermath of the Great Recession.
The decline in savings has coincided with persistent inflation. Consumer prices increased 3.8% annually in April, while rising fuel costs linked to instability in the Middle East added fresh pressure on household budgets. Average gasoline prices reached $4.22 per gallon this week, substantially higher than levels seen at the end of last year, according to the outlet.
Households across income groups are adjusting spending patterns in response to higher costs. Consumers are increasingly searching for discounts, purchasing more sale items and delaying discretionary purchases. Dollar General executives said during the company’s latest earnings call that more shoppers earning over $100,000 annually are visiting discount stores, reflecting broader efforts by consumers to stretch their budgets.
Financial pressure has been especially evident among lower-income households. A recent report from the Federal Reserve Board of Governors found that lower-income families are experiencing greater financial strain, while higher-income households have generally remained more resilient due in part to gains in financial markets and stronger asset values. Middle-income consumers were described as carefully evaluating purchases and seeking more value from everyday spending.
Financial institutions have also reported signs of changing consumer behavior. According to Bank of America Institute, spending on gasoline has risen significantly compared with a year earlier, while overall consumer spending has remained relatively stable. The bank’s analysts noted that tax refunds distributed earlier this year provided a temporary boost to household finances, helping offset some of the impact of higher living costs.
The strength of the labor market and stock market has also helped support spending. The benchmark S&P 500 has gained more than 10% this year, providing a financial cushion for higher-income households with investment portfolios. At the same time, unemployment remains historically low, allowing many consumers to continue spending despite elevated costs.
However, credit card usage has increased as some households seek to manage rising expenses. The National Foundation for Credit Counseling said more consumers have been using credit cards to cover essential purchases, including groceries and household necessities. The organization reported a growing reliance on revolving credit compared with pre-pandemic years.
Data from the Federal Reserve Bank of New York show that credit card delinquencies among borrowers more than 90 days behind on payments reached a 15-year high during the first quarter of 2026, highlighting financial stress among some consumers. Newer delinquencies, however, remained relatively stable during the same period.
Across the country, households are making practical adjustments to cope with rising costs. Consumers interviewed by The Washington Post reported scaling back travel plans, cooking more meals at home, comparing prices across multiple stores and postponing non-essential purchases. Many also said they were focusing more heavily on promotions and discounts while trying to preserve savings.
