For third month in a row, Americans are spending more than they’re making

Report Issue

Please complete the required fields.

Your Name

Email

Reason (required)
This post contains broken linksPost has incorrect informationPost has spamCopyright IssueOther

Description

Submit

Along with the headline August personal consumption expenditure data, new personal income and spending data came out Friday: For the third month in a row, Americans have been spending more than they’re making — and saving less, too.

In an ideal world, you want to be doing more than you’re spending. But in reality, that’s not always how it works.

What do households do when they see the prices for things they’re buying going up?

Betsey Stevenson, a professor of economics and public policy at the University of Michigan, said often, they’ll keep buying what they’re used to buying and just dip into savings or pull out a credit card to do it.

“You know, you go to the store and you got your ingredients ready for dinner, and now the prices are higher,” she said. “And you know, cognitively, do you want to, like, rethink your entire dinner right there on the spot at the grocery store? Or do you just buy the stuff and then rethink your dinner for the next week?”

Or, if you’re well into planning a bathroom renovation, like Stevenson is, and then Trump announces tariffs on bathroom vanities, like he did yesterday?

“You’re probably going to go forward with your renovation,” she said — even if it means spending more than you planned.

That is what people seem to be doing lately.

“Consumers remain generally resilient in the face of tariff-induced cost pressures,” said Gregory Daco, chief economist at EY.

He said there is evidence, though, that not all consumers are resilient.

“Families at the lower to middle end of the income spectrum are increasingly under pressure from a labor market that is softening and prices that are rising, while individuals at the higher end of the income spectrum are still spending relatively freely,” Daco said.

Lately, many Americans are spending down savings and putting more on credit cards. Michael Linden, senior policy fellow at the Washington Center for Equitable Growth, said that it is not sustainable. Especially with the labor market slowing.

“You can only finance your consumption through credit for so long. Credit is good as a bridge,” he said, but not as a long-term solution.