Groceries and Gas Lead Consumer Spending Strain Amid Rising Costs

Mark Eisenberg
Photo: Finoracle.net

Consumer Spending Under Pressure from Rising Grocery and Gas Prices

For several years, Americans have grappled with the rising cost of living, but recent data suggests many are approaching their financial limits. Despite persistent inflation and increasing prices for essentials, consumer spending remains resilient, according to the latest personal consumption expenditures price index released Friday.

Credit Card Use Surges for Essential Purchases

A new TD Bank credit card pulse survey, shared exclusively with CNBC, highlights a growing dependence on credit cards for everyday necessities such as groceries and gasoline. With grocery prices climbing 2.7% year-over-year in August—the fastest increase since August 2023—nearly half of Americans (46%) identify groceries as their primary monthly credit card expense. This reliance underscores the difficulty many consumers face in adjusting to elevated prices for basic goods, from staple foods to fuel. A Wells Fargo report found that approximately 90% of consumers experienced “sticker shock,” especially when purchasing food or filling up their tanks.
“The things that people tend to notice more frequently become more prominent in people’s minds,” said Chris Fred, head of credit cards and unsecured lending at TD Bank.

Gasoline Remains a Significant Expense Despite Price Drops

Although gas prices have declined compared to last year, 13% of the over 1,000 adults surveyed by TD Bank reported gasoline as their top credit card spending category. This challenges the common perception that credit card use is mostly for discretionary spending.
“There is a common misperception of credit card spending as frivolous, but that just isn’t the reality for most Americans,” Fred added.

Non-Discretionary Spending Drives Household Budget Strain

TD Bank’s findings also reveal the strain that essential spending places on household finances. Nearly half (49%) of consumers noted that grocery expenses increased the most over the past year, while 10% identified gasoline as their largest spending growth category.

Credit Card Balances Approach Record Highs

Research from the Federal Reserve Bank of New York confirms that credit card balances continue to climb. In the second quarter, outstanding balances reached $1.21 trillion, marking a 2.3% increase from the previous quarter and matching last year’s all-time high. Equifax data further indicates that despite elevated prices and borrowing costs, consumers keep spending. Sheila Bair, former chair of the U.S. Federal Deposit Insurance Corporation and member of CNBC’s Global Financial Wellness Advisory Board, advises caution.
“The presumption is, don’t borrow. The exception is a credit card that you pay off at the end of every month,” Bair said.

FinOracleAI — Market View

The latest consumer spending patterns underscore the persistent inflationary pressures on essential goods, driving increased reliance on credit cards to bridge the affordability gap. While consumer demand remains robust, rising credit card debt signals growing financial vulnerability among households.
  • Opportunities: Financial institutions can offer tailored credit solutions and budgeting tools to assist consumers managing higher essential expenses.
  • Risks: Elevated credit card debt levels may increase default risk, especially if inflation persists or economic conditions deteriorate.
  • Policymakers should monitor inflation trends and household debt dynamics to mitigate potential consumer distress.
Impact: The data points to a cautious but persistent consumer spending environment, with credit cards playing a critical role in maintaining purchasing power amid rising costs, highlighting both resilience and risk in household financial health.
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Mark Eisenberg is a financial analyst and writer with over 15 years of experience in the finance industry. A graduate of the Wharton School of the University of Pennsylvania, Mark specializes in investment strategies, market analysis, and personal finance. His work has been featured in prominent publications like The Wall Street Journal, Bloomberg, and Forbes. Mark’s articles are known for their in-depth research, clear presentation, and actionable insights, making them highly valuable to readers seeking reliable financial advice. He stays updated on the latest trends and developments in the financial sector, regularly attending industry conferences and seminars. With a reputation for expertise, authoritativeness, and trustworthiness, Mark Eisenberg continues to contribute high-quality content that helps individuals and businesses make informed financial decisions.​⬤