As higher prices persist, consumers are trading in discretionary spending in a shift toward saving and covering everyday essentials, as February’s Consumer Price Index (CPI) marks a second consecutive month-over-month increase¹ and consumer food spend rises 7% year-over-year to $195 per week in February 2024.²

For many, something has to give. Many consumers appear to be making trade-offs between the items they want and the essentials they need – curtailing spend on dining out, clothing, and home improvements, according to Empower Personal Dashboard^TM data. 

Spotlights from the spending slowdown:*

• General merchandise purchases of non-food items dropped 9.1% from January to February
• After a boost in travel-related purchases during the post-holiday season, wanderlust is on the waitlist, as spending decreased 6.2% from January to February
• Dining dollars are also waning, with Americans spending an average of $800/month in February. Eating out has been steadily decreasing month-over-month since July 2023, when spending peaked at $929/month
• Consumers are curbing spend on clothing and shoes to $591/month in February – another spending category trending downwards
• Doers are all done, as home improvement spending tapered off to an average of $481 in February

Slower sales signal a squeeze

Retail sales (excluding volatile categories like gas, autos, and building materials) flatlined in February, missing analyst expectations for a 0.4% gain.³

“February’s consumer spending data leaves open the question of whether the U.S. consumer is finally tapping out of the post-COVID spending spree that has supported growth since the economy reopened,” says Tom Nun, Portfolio Strategist at Empower. “After a few quarters supporting growth in a very substantial way, the U.S. consumer is no longer contributing much to the economy’s bottom line, at least for now."

Overall spending across general merchandise, travel, restaurants, clothing/shoes, and home improvement decreased 3% from January ($4,054) to February ($3,931).

Average spend per user per month

Read more: Wage increases are outpacing inflation, but is that enough?

Not so fast: Some spending categories are too good to go

Still, there are trade-offs Americans just aren’t willing to make. Spoiling furry friends is top among them, with Americans putting an average of $305 a month on their pets and pet care, a 7% increase compared to January.

Spending on streaming services, ticket sales, and sports gambling held steady in February, coming in at $299 a month, on average (nearly flat year-over-year, with $293 in February 2023). Plus, dues and subscriptions to content providers like The New York Times, YouTube Premium, and Apple were all on the up, increasing 11% since January.

Swinging back into saving

The personal savings rate – how much people save as a percentage of their disposable income – was 3.8% in January 2024.⁴ While still below the long-term average of 8.48%, this savings level shows a modest increase from December 2023 (+0.1%).⁵

Around half (51%) of older generations and 35% of younger generations Empower surveyed plan to live more frugally in order to achieve financial goals. Empower research also shows investing is a top money goal for the vast majority (80%), with many Americans planning to put more money in stocks (44%), employer-sponsored retirement plans (37%), and high-yield savings accounts (34%).

“With saving account interest rates steadily increasing, consumers have more opportunity to save efficiently,” Nun says. “By being strategic with options like tax-advantaged accounts, high-yield savings accounts, and speaking to a trusted financial professional, they can make significant progress toward short- and long-term goals.”

Read more: How spring cleaning your finances could save you money

Credit card usage (and delinquencies) on the rise

Credit card balances increased by $50 billion, or roughly 5%, in the fourth quarter of 2023, according to a report by the New York Fed.6 Credit card delinquency rates have also spiked to their highest since the Great Recession.⁷ Transitions to delinquency for both credit cards and auto loans are still rising above pre-pandemic levels.

Share of balances where payments are at least 30 days late

Americans are cutting back on “buy now, pay later” (BNPL) purchases. According to Empower Personal DashboardTM data, the number of consumers using BNPL to fund their purchases dropped 14% from January to February, with total spend per user decreasing 12% month-over-month to $276, on average.

Spending switch-ups between age groups

Spending often varies by age: Older Americans spent 89% more than younger Americans on cable in February, and 68% more on their hobbies.

However, younger Americans are putting a greater share of their money toward charitable giving (+55%), pets (+55%), and home maintenance (+56%). On the flip side, they’re spending substantially less on car-related expenses (-54%) and gas (-30%), as well as electronics (-60%) and personal care (-36%).

Spending differences between age groups

Spending differences between younger (39 and younger) and older (40 and older) Americans in February 2024

Source: Empower Personal Dashboard^TM data