Higher Housing and Gas Costs Squeeze What’s Left for Shopping

Consumer prices accelerated in August, adding to household expenses at a time when many financially constrained consumers have already reduced the discretionary spending they can most easily cut.

The Consumer Price Index, released Friday (Sept. 11) by the Bureau of Labor Statistics, rose 0.4% in August on a seasonally adjusted basis and 3.4% from a year earlier. Shelter increased 0.3% during the month and 3% over the past year. Energy rose 2.1% in August after falling 1.5% in July, with gasoline up 3.9% for the month.

Food prices were steadier in August, but households are still paying more than they were a year ago. Food and beverage prices increased 0.1% for the month and 2.7% annually. Food at home was up 2.2% from August 2025, while food away from home rose 3.4%.

The August figures put more pressure on recurring expenses that leave consumers with relatively little discretion. Housing, groceries and gasoline generally must be paid before households decide how much they can devote to restaurants, travel, entertainment or purchases that can be postponed.

PYMNTS Intelligence data showed that many consumers with the least financial flexibility have already been making those decisions.

The PYMNTS Consumer Expectations Index found in June that 53% of consumers living paycheck to paycheck and struggling to pay their bills reduced spending on nonessentials such as dining out, entertainment and travel over the previous year. Meanwhile, 23% increased it.

Among paycheck-to-paycheck consumers who were paying their bills without difficulty, 41% reduced nonessential spending, and 27% increased it. Consumers not living paycheck to paycheck were the only group in which increases outnumbered reductions, as 30% said they were spending more on nonessentials, compared with 27% spending less.

The figures point to different spending capacity across households. Consumers with adequate savings and income still have room for discretionary purchases. For those already cutting nonessential expenses, another increase in recurring costs leaves fewer expenses available for an easy reduction.

Major Purchases Face a Different Test

Some of the August CPI data might ordinarily favor retail spending, in at least a few categories.

Furniture and bedding prices fell 0.9% during the month and were 0.8% lower than a year earlier. Apparel prices were unchanged in August.

Falling furniture prices, however, do not address whether consumers believe they can afford a major purchase. PYMNTS Intelligence found that its Macro and Buying Climate Subindex remained below its neutral reading of 50 throughout the period covered by its June report. The measure captures consumers’ views of economic conditions and whether they consider the period favorable for significant purchases. The subindex indicated that consumers continued to view conditions for significant purchases negatively.

Consumers with stronger finances have more room to act. PYMNTS Intelligence found that consumers not living paycheck to paycheck were more likely to hold financial assets and could treat higher prices as manageable. That financial capacity supported spending on home improvements, major purchases and other discretionary items. Consumers living paycheck to paycheck did not have the same cushion.

In her Wednesday (Sept. 9) column, “Paycheck-to-Paycheck Consumers Have Already Cut the Lattes” PYMNTS CEO Karen Webster examined survey responses from 2,881 consumers covering 22 spending categories. The survey found that 41% of paycheck-to-paycheck consumers attributed their circumstances to everyday spending, while 31% pointed to a short-term financial shock and 28% cited long-term decisions involving housing, education, childcare, family support or debt.

For some households, inexpensive discretionary expenses are still available to cut. Others have already reduced lunches out, subscriptions and similar purchases. Their remaining options include expenses such as travel, childcare and student loan payments, while housing, insurance and cars are among the costs consumers consider hardest to change.

“The next thing on the list to cut has consequences the whole household can feel,” Webster wrote.

August’s CPI figures add another month of price increases to budgets that are already producing different spending patterns according to consumers’ financial condition. Households with sufficient capacity can continue making discretionary and major purchases. Among consumers already cutting those expenses, higher recurring costs reduce the number of purchases that can remain in the monthly budget.