U.S. consumers show mixed spending but rising debt and low savings

U.S. households are spending more even as confidence wanes and debt climbs, a paradox that economists say reflects deepening strain for lower‑income families. Credit‑card balances have risen sharply since the pandemic, while the personal savings rate has slipped to a 22‑year low, underscoring mounting financial pressure [1].

Key takeaways

• Consumer sentiment is at its lowest level since 2022, yet retail spending rose nearly 2% in March [1].
• Credit‑card debt has grown about 70% since the pandemic, reaching $1.28 trillion and up 5.5% year‑over‑year [1].
• About 13% of credit‑card accounts were delinquent in Q1, the highest rate since 2011 [2].
• The personal savings rate fell to 2.6%, the lowest in two decades [2].
• Gasoline prices have jumped over 30% since the Iran‑related conflict began, prompting lower‑income households to cut fuel use [1][2].

Rising debt and slipping savings signal strain

Experts interviewed by KHOU note that while the National Retail Federation reports higher spending, the Surveys of Consumers show sentiment at a multi‑year low, especially among lower‑income families who are increasingly relying on credit cards for essentials like food and utilities [1]. Federal Reserve Bank of New York data confirm that credit‑card debt has surged 70% since the COVID‑19 pandemic, now totaling $1.28 trillion and rising 5.5% from the previous year [1]. This mounting debt is reflected in delinquency trends: the New York Fed reports that 13% of credit‑card accounts were past due in the first quarter, the highest level since 2011 [2].

At the same time, the personal savings rate has contracted dramatically. The rate fell to 2.6% in April, down from 3.6% in March and far below the 5.5% level a year earlier, marking the lowest savings ratio in 22 years [2]. Economists attribute this decline to higher tax refunds that are expected to run out by July, suggesting that many households are already tightening belts [2].

Energy costs and income pressures amplify the challenge

Gasoline prices have risen more than 30% since the start of the Iran war, a factor that disproportionately affects lower‑ and middle‑income households. Research from the New York Fed shows these groups reduced fuel consumption in March even as overall spending grew, while high‑income households largely maintained their driving habits [1][2]. Glenn Williams of Primerica warns that sustained high gas prices could force middle‑income families into further trade‑offs, as fuel is essential for work and daily life [2].

Compounding the issue, income growth is lagging inflation. The Consumer Price Index and the Personal Consumption Expenditures price index indicate that after adjusting for inflation, household income fell more than 1% over the past year—the steepest post‑tax decline since the Great Recession [2]. This erosion of purchasing power intensifies the financial squeeze on consumers already burdened by debt and low savings.

Why it matters

The convergence of rising debt, higher delinquency rates, dwindling savings, and persistent energy price pressures suggests that the current consumer spending surge may be unsustainable, especially for lower‑income Americans. If gas prices remain elevated and inflation persists, economists warn that demand destruction could spread upward from the lowest earners, potentially slowing overall economic activity. Monitoring credit‑card delinquencies, savings trends, and income‑inflation gaps will be crucial for gauging whether consumer resilience can hold or if a broader pullback looms.