April data shows inflation-adjusted spending rose 0.1% while savings fell to 2.6%, the lowest since 2020.
US households cut savings to 2.6% in April, the lowest level in nearly four years, as inflation outpaced income growth. Inflation-adjusted consumer spending rose just 0.1% during the month, while the PCE price index climbed 3.8% year-over-year, its highest reading since 2023.
Core PCE, excluding food and energy, increased 3.3% annually. Disposable income adjusted for inflation declined, underscoring the strain on household budgets despite continued spending. The data suggests consumers are relying on savings to sustain purchases amid persistent price pressures.
The Federal Reserve’s preferred inflation gauge remains elevated, complicating expectations for potential rate cuts. Markets are closely watching whether demand softens further as savings depletion continues.