Grocery and Shelter Costs Rise in November, Straining Consumer Budgets

The key takeaway from the Consumer Price Index (CPI) released Wednesday (Dec. 11) is that the pace of inflation pace quickened in November, as reported by the Bureau of Labor Statistics.

Two key areas of essential spending — food and shelter — saw yet another boost to prices. Groceries were more expensive, month on month, than they have been for a while. The end result is that for paycheck-to-paycheck consumers, budgets have become even more strained.

The overall annualized inflation rate was 2.7%, which met consensus expectations, increasing from the 2.6% pace that had been logged in October. As measured on a monthly basis, between October and November, prices were 0.3% higher. The cost of shelter was 0.3% higher, and has surged 4.7% from a year ago.

Overall, food costs were 0.4% higher. But that category’s overall trend was outpaced by the prices paid for food at home (i.e., groceries), which were 0.5% higher in November, after a muted 0.1% gain in October, month over month, and where that line item had been roughly flat during several months of 2024. Annual food price growth reached 2.4%, with notable gains in meat, poultry, fish and egg categories, contrasting with declines in cereal and bakery products.

Shelter contributed to nearly 40% of the monthly increase of all items, reflecting rising housing costs, including rents and homeowners’ equivalent rent. Food accounted for roughly 17% of the monthly increase. Together, these essential categories underscore persistent inflationary pressures on core living expenses, shaping consumer spending dynamics.

While inflation remains above the Federal Reserve’s 2% target, its gradual moderation, particularly in core components like shelter, could influence future monetary policy decisions. Energy price declines offer some relief to consumers, but persistent increases in essential categories like food and shelter suggest ongoing cost pressures.

Paycheck-to-Paycheck Pressures

Those pressures are being most keenly felt by paycheck-to-paycheck consumers. In fact, as PYMNTS Intelligence reported the same day the CPI data were released, cash flow shortages are most prevalent among paycheck-to-paycheck consumers.

It might be no surprise to see those pressures firmly entrenched, given the consumers making less than $50,000 annually spend nearly 60% of their income on food and shelter, according to PYMNTS data. Additionally, over three-quarters of consumers in this income strata define themselves as living paycheck to paycheck.

In an effort to alleviate some of those pressures, credit remains a popular payment method. There’s also been incremental use of payment options such as buy now, pay later (BNPL) to stretch out payments and tackle them over weeks or months.

The data shows that BNPL has appeal, particularly among those facing cash shortfalls. In fact, cash flow-compromised consumers are 3.5 times more likely to use BNPL to make purchases — and now has been used by 9% of those consumers who say they’ve grappled with cash flow pressures. Separate reports indicate that 51% of paycheck-to-paycheck consumers struggling with monthly expenses have no readily available savings.