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American consumers have been living beyond their paychecks for two straight years. Real disposable personal income growth has trailed real consumer spending for 24 consecutive months as of mid-2026, the longest such stretch on record dating back to the 1960s.
The previous record was roughly 23 months during the late 1970s, a period most economists remember fondly for its stagflation and general economic misery.
The numbers paint a grim picture
The personal saving rate dropped to 2.7% in June 2026. That’s down from 4.4% in January, a 1.7 percentage point decline in just six months.
To put that in perspective, the saving rate has only been lower during brief windows in 2022 and the mid-2000s, right before the financial crisis turned “subprime” into a household word.
Meanwhile, credit card balances hit $1.26 trillion in the second quarter of 2026 after a $21 billion quarterly surge. That’s the second-highest level ever recorded.
The spending-income divergence is stark in inflation-adjusted terms. Real consumer spending, measured by personal consumption expenditures, grew at approximately 2.6% year-over-year in late 2025 and early 2026. Real disposable income growth struggled to crack even 1% in some readings.
Who’s actually doing the spending
One of the more telling dynamics beneath the headline numbers is who’s keeping the consumer economy afloat. Analysts note that spending growth appears disproportionately driven by higher-income households, while lower- and middle-income earners face mounting financial pressure.
This split matters because consumer spending accounts for roughly two-thirds of US GDP.
Inflation has been the quiet villain in this story. Wages have grown in nominal terms, but inflation has consistently eaten into purchasing power, leaving real income growth anemic.
Why this matters for markets and the economy
There are some modestly encouraging signs buried in the data. Credit card utilization rates and delinquency metrics have shown signs of stabilization or even slight decline, which suggests the debt buildup hasn’t yet triggered a cascade of defaults.
The risk is what happens next. A saving rate of 2.7% leaves almost no buffer for unexpected shocks. During the 2008 crisis, the collapse in consumer spending was amplified by the fact that households had already depleted their financial reserves during the preceding boom years.
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