How Are Consumers Still Spending?

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Inflation and Credit Trends 2026

How Are Consumers Still Spending?

Yesterday’s data left us with a puzzle. The U.S. economy is still growing. Consumer spending remains strong. But the personal saving rate has fallen sharply, disposable income has been uneven, and households continue to report considerable economic pessimism.

That raises the next question:

If consumers are still spending while their financial cushion is shrinking, what is keeping them going?

The latest inflation and consumer-credit data offer some clues. But they also make the picture more complicated. Consumers are still spending even though real wage growth has stalled and savings have fallen. Credit continues to expand—but delinquencies have not broadly deteriorated.

So is consumer resilience stronger than it looks? Or are households gradually using up their margin for error?

Inflation Is Moderating—But Prices Are Still High

The first thing to clarify is what the inflation indexes show. CPI, Core CPI, PCE, and Core PCE are price indexes. Their upward movement tells us that the overall price level continues to rise. It does not necessarily mean inflation itself is accelerating.

The latest Bureau of Labor Statistics report shows headline CPI increased 3.4% over the 12 months ending in July, slightly below the 3.5% rate recorded in June. Core CPI, which excludes food and energy, increased 2.5% over the same period.

That is meaningful progress compared with the inflation shock of several years ago. But lower inflation is not the same thing as lower prices.

If inflation falls from 6% to 3%, prices do not return to where they started. They simply rise more slowly. That distinction helps explain why consumers can hear that inflation is improving while still feeling that everyday life is expensive.

  • Food prices: up 3.0% over the year in July
  • Shelter: up 3.2%
  • Energy: up 14.7%

So the inflation emergency may have eased, but the cumulative price-level shock remains part of household reality.

Wages Are Rising—But Purchasing Power Is Not

At first glance, nominal wages look encouraging: average hourly earnings have risen steadily. But after adjusting for inflation, the picture becomes much less impressive.

According to the Bureau of Labor Statistics, real average hourly earnings fell 0.2% from July 2025 to July 2026. They also declined 0.1% from June to July.

That answers one of our central questions: Are wages keeping pace with prices? Recently, not quite.

Workers are earning more dollars, but those dollars are not buying meaningfully more than they did a year ago. That does not mean household finances are collapsing, but it helps explain why a growing economy may not feel like an improving economy.

Consumers Are Still Spending Faster Than Income Is Growing

The latest personal-income data reinforce the tension. In June:

  • Personal income increased 0.2%
  • Disposable personal income increased 0.2%
  • Consumer spending increased 0.3%
  • The personal saving rate fell to 2.7%

Consumption continues to rise while the share of disposable income being saved has fallen. That leaves us asking: If spending is holding up better than income growth, what is bridging the gap?

Credit is one possible answer.

Consumer Credit Is Still Expanding

The Federal Reserve reports that consumer credit grew at a 2.6% annualized rate in the second quarter of 2026. Revolving credit grew at 3.9%, while nonrevolving credit grew at 2.1%. In June alone, total consumer credit increased at a 3.3% annualized rate.

Total consumer credit is higher, nonrevolving credit is higher, and revolving credit (primarily credit card debt) has climbed back toward recent highs.

That makes rising credit an obvious place to look for evidence of household stress. But credit balances alone cannot tell us why people are borrowing. Higher balances could reflect financial strain, but they could also reflect population growth, higher nominal prices, auto purchases, or healthy consumption.

So we need another signal: Delinquencies.

And This Is Where the Story Becomes Much Less Obvious

If consumers were rapidly becoming unable to support their spending, we might expect delinquency rates to deteriorate sharply. That is not what the latest broad data show.

The New York Fed reported that total household debt actually declined slightly in the second quarter to $18.8 trillion, while the share of outstanding debt in some stage of delinquency improved slightly to 4.7%.

  • Credit-card balances rose by $21 billion to $1.26 trillion.
  • Auto balances increased by $28 billion to $1.71 trillion.
  • Transitions into early credit-card delinquency were broadly steady.
  • Serious delinquency transitions changed relatively little.

The credit data do not currently look like a household system breaking down. They look more like a household system carrying a considerable amount of pressure without yet showing broad failure.

Two Stories Can Be Built from the Same Data

Story 1: Evidence for Consumer Resilience

  • Nominal wages continue rising
  • Consumers continue spending
  • Credit remains available
  • Broad delinquency rates are relatively stable
  • Core inflation has moderated
  • Households are still servicing most of their debt

Takeaway: Consumers may simply be more financially resilient than pessimistic sentiment suggests. Employment, income, access to credit, and household balance sheets may still be strong enough to sustain consumption.

Story 2: Evidence for Household Pressure

  • Real hourly earnings are slightly lower than a year ago
  • The personal saving rate is only 2.7%
  • Revolving credit is rising
  • Mortgage rates remain elevated
  • Headline inflation is still 3.4%
  • Some credit-card and auto delinquency measures remain elevated

Takeaway: Households may be maintaining spending by accepting thinner savings and greater financial strain.

Both stories are plausible, and this dataset cannot tell us conclusively which one will dominate. That may be the most important finding.

What Should We Watch Next?

If household pressure is building, we should expect it to appear somewhere eventually: delinquency rates, employment, retail spending, credit growth, or housing.

Mortgage rates remain elevated even after having fallen substantially from their recent peak. Home prices remain high, affordability has been strained, and housing activity has weakened.

So the next question becomes:

If consumers are still holding up, what is happening in the part of the economy where high prices and high interest rates collide most directly?

Next, we'll look at the housing market.