Essential costs consume nearly half of American budgets, data shows

This increase is driven by rising costs across both categories. Housing expenditures rose by 5.8% compared to 2024, with average household spending reaching $27,790. Shelter costs saw an even steeper increase of 8%, with rented dwellings climbing 10.8% and owned dwellings rising 7.3%. Food spending also increased, with the average consumer spending $10,633 in 2025, up from $10,169 the prior year. This was partially fueled by an 11.7% rise in spending on meat, poultry, fish, and eggs.

Consumer inflation, as measured by the Consumer Price Index, increased by 2.6% in 2025, but housing and food expenses grew at a faster rate. This financial strain continues into 2026, as reflected in declining consumer sentiment.

The University of Michigan’s October consumer sentiment index registered at 48.0, a slight change from September’s 48.1, but significantly lower than the 53.6 reading from October 2025. The current economic conditions index also fell to 46.7 from 50.9 the previous month. This reading was the second-lowest in the survey’s history.

“Purchasing power continues to dominate consumer views of the economy,” stated Joanne Hsu, director of the University of Michigan’s Surveys of Consumers. “This month’s decline in the Current Conditions subindex was driven entirely by buying conditions for durable goods, which plunged 18% on the basis of higher interest rates and rising concerns about the affordability of such purchases.”

The pressures documented in the BLS report persist. An Urban Institute tracker found that 49% of American families lack the resources to cover essential expenses and maintain financial security. The issue has become a focal point in political discourse, with candidates like President Trump in 2024 and New York City Mayor Mamdani in 2025 addressing affordability in their campaigns.

Renters are now paying approximately $710 more per month for housing than they did in 2017, while families with two young children face an additional $6,600 in annual childcare costs compared to a decade earlier. A Pew Research Center survey revealed that 44% of U.S. adults experienced financial hardship related to medical care, transportation, rent, mortgages, or food assistance.

Households in the lowest income bracket—earning less than approximately $60,000—spend more than they earn. These households made $18,125 in pre-tax income but had $37,935 in annual expenditures. While incomes did rise, with average pre-tax income climbing 6.4% to $110,847 in 2025, spending increased at a rate of 4.3% to $81,905.

Healthcare costs also increased, with average spending rising from $6,197 to $6,470, largely due to a 6.3% increase in health insurance premiums, from $4,055 to $4,310. Utility bills also rose, with average monthly expenses reaching $411—a 4.1% increase. Transportation spending increased modestly by 1.3%, despite a 5.4% decrease in gasoline and fuel expenses. Average gas prices in 2025 were $3.10, compared to a projected $3.91 for 2026.