Value Over Vanity: The New Rules of American Consumer Spending

:  U.S. consumers are navigating persistent cost pressures with strategic spending—from groceries and housing to auto ownership and entertainment. Discover key trends, forecasts through 2026, and how Americans are redefining value in an elevated price environment.

 Value Over Vanity: The New Rules of American Consumer Spending.

US Consumer Spending Trends:Navigating Price Pressures and Shifting Priorities

American consumers continue to face elevated costs across essential categories, though the pace of inflation has moderated from the sharp increases of 2021-2022. Here's how key spending areas have evolved and what lies ahead.

Groceries: Steady but Slower Growth -Food prices have continued climbing, with grocery costs up 1.3% from September 2023 to September 2024, and 2.2% from May 2024 to May 2025. While items like eggs, beef, and chicken saw significant increases driven by avian flu and global supply disruptions, some products like bananas and potatoes actually became cheaper. As Americans continue to prioritize at-home dining to control costs, the USDA forecasts a 2.2% rise in grocery prices for 2025—still below the historical average.

Clothing: Modest Increases, Smart Shopping -Apparel costs rose moderately, up 0.55% since February 2024 and 3.80% since February 2022. Consumers are responding with "trade-down" behavior, choosing lower-priced brands and fueling growth in the resale market. This trend is expected to continue as shoppers prioritize value over brand names.

Entertainment: Selective Splurging -Despite "streamflation," consumers maintain spending on streaming services, with Millennials and Gen X leading multi-subscription growth. Travel remains a splurge category, particularly cruises and international flights, even as other discretionary spending faces pressure.

Housing: The Persistent Challenge -Housing costs remain the biggest burden. Average rent increases hit 18% year-over-year in some areas between Q1 2021 and Q1 2022, with continued upward pressure as high mortgage rates keep potential buyers in the rental market. Home prices continue appreciating, though at a moderating pace, with the S&P Case-Shiller Index showing 3.88% year-over-year growth in February 2025.

Automobiles: Price Sensitivities- As elevated costs persist across essentials, the automobile sector presents a mix of resilience and restraint. Though inflationary pressure has eased, car ownership costs remain steep—with average monthly payments nearing $750, primarily driven by high loan rates. New vehicle prices dipped slightly in late 2023, yet affordability continues to challenge households. Industry analysts project light vehicle sales to grow modestly in 2025 and 2026, with U.S. volumes expected to reach 16.4 million units in 2025 and 16.7 million in 2026, according to Scotiabank and S&P Global Mobility.

Looking Ahead: Cautious Consumers- Morgan Stanley forecasts consumer spending growth will slow to 3.7% in 2025 and 2.9% in 2026, down from 5.7% in 2024. This deceleration reflects increasing consumer caution, with affluent shoppers continuing to drive spending while lower- and middle-income households become more selective.

The National Association of Realtors projects modest home price increases of 3% in 2025 and 4% in 2026, while rental pressure persists until mortgage rates potentially decline to 5.50-5.75% by 2026.

The Bottom Line -While the inflation crisis has cooled, consumers face a new reality of persistently higher costs. Across every major category—from groceries to housing—Americans are recalibrating spending with practicality in mind. Whether it's opting for store-brand apparel, embracing at-home dining, or rethinking vehicle purchases, today's consumers are guided by long-term affordability and strategic trade-offs. As inflation steadies, the shift toward value-seeking behavior—not just cost-cutting—defines the emerging landscape. The overall outlook points to slower growth and increased value-seeking behavior as Americans adapt to this elevated price environment.

SP

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