The American Consumer is Holding On – But For How Long?
July 9, 2026
Source: Bloomberg
Note: Retail Sales are seasonally adjusted monthly retail and food services sales; Savings Rate data represent the personal saving rate as a percentage of disposable income
Consumer spending continues to rise,1 supported by a resilient U.S. labor market and steady household income growth. Unemployment remains lower by historical standards, while nominal wage gains and higher disposable income have helped consumers maintain spending levels, despite elevated interest rates and higher costs for housing, food and other essentials.2 Household wealth and strong equity market performance can also support consumer spending, with higher income households continuing to drive a disproportionate share of discretionary spending, including travel, entertainment and other non-essential purchases.3
Today’s Chart of the Week highlights a growing divergence between spending and savings behavior. Consumers are allocating a smaller share of income to savings and increasingly relying on credit to support consumption.4 Climbing expenses tied to core needs such as home costs, insurance premiums, medical care and utility bills have absorbed a larger share of household budgets, limiting the capacity to save even as wages have increased. Notably, a portion of the spending growth reflects higher prices rather than a meaningful increase in real consumption volumes.5
The excess savings accumulated during the pandemic have largely been exhausted,6 and the personal savings rate has fallen to approximately 3.0%, below its longer-term average.7 While strong employment and income trends continue to sustain consumer demand, the combination of declining savings and rising household debt raises questions about the long-term sustainability of current spending patterns. A lower savings cushion leaves households more vulnerable to economic disruptions, including job losses, market volatility or unexpected expenses.
Key Takeaway
Overall, the U.S. consumer remains resilient; however, pressure is building beneath the surface. For many households, wage growth has not kept pace with the rising cost of living, particularly in housing, insurance and healthcare. The divergence between rising retail sales and declining savings suggests consumers are increasingly dependent on current income and, to some extent, credit to sustain spending. If low savings persist alongside rising debt levels, household finances could become more vulnerable to economic shocks, potentially limiting consumers’ ability to support future economic growth.
Sources:
1, 2, 5 U.S. Bureau of Economic Analysis, Personal Income and Outlays, May 2026.
3 Federal Reserve Bank of New York, Liberty Street Economics, Tracking the K-Shaped Economy, May 1, 2026.
4 Federal Reserve Bank of New York, Household Debt and Credit Report, Q1 2026; Federal Reserve Board, Consumer Credit - G.19, April 2026.
6 Federal Reserve Bank of San Francisco, Pandemic Savings Are Gone, May 3, 2024.
7 U.S. Bureau of Economic Analysis, Personal Saving Rate; Federal Reserve Bank of St. Louis, Personal Saving Rate (PSAVERT), May 2026.
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