Consumers Stay Resilient as Inflation Pushes Shelter and Food Prices Higher

The first inflation data since the start of the October government shutdown offered the clearest signal in weeks on how prices continue to shape household behavior.

Headline inflation rose 0.3% in September following a 0.4% increase in August, pushing the annual rate to 3%, the highest level since the beginning of the year, according to the Consumer Price Index Summary released Friday (Oct. 24) by the Bureau of Labor Statistics.

Although the pace of increase slowed, the underlying reality remains that essentials such as food and shelter are keeping inflation sticky. For millions of consumers in the United States who are managing their budgets month to month, these categories continue to drive most of the strain.

Shelter and Food Prices Still Rising

Shelter costs, which account for more than one-third of the index, rose 0.2% in September and 3.6% over the past year. Rents increased 0.2% month over month and 3.4% from a year earlier, while owners’ equivalent rent edged up 0.1%, the smallest monthly rise since 2021.

Food prices continued their climb, with the overall index up 0.2% in September and 3.1% year over year. Grocery prices increased in four of six major food groups. Cereals and bakery products and nonalcoholic beverages each gained 0.7%, while meats, poultry, fish and eggs rose 0.3%. Over the past 12 months, protein categories rose 5.2% and nonalcoholic beverages 5.3%, the largest annual increases among food components.

Dining out costs also rose, with food away from home up 0.1% and limited-service meals gaining 0.2%, leaving restaurant prices 3.9% higher than a year ago.

Other Key Categories Show Mixed Trends

Energy prices rebounded, increasing 1.5% in September after a 0.7% rise in August, driven by a 1.1% gain in gasoline costs. Retail product prices were up 1.2%, led by apparel at 2.6%, furniture and bedding at 0.9%, and appliances at 0.7%.

Overall, price stability remains elusive across categories, suggesting that everyday essentials continue to erode household purchasing power.

Wages Still Trail, but Consumers Adjust

While nominal wages have increased, they continue to lag inflation on a real basis.

Recent findings showed that consumers are adapting by trading down to store brands, cutting discretionary spending and using credit cards strategically to manage cash flow. Debit card use remains elevated as consumers try to stay within budget and limit revolving debt.

But there’s a balancing act that must be navigated. The PYMNTS Intelligence report “Paycheck to Paycheck 2025: How Rising Prices and ‘Wishful Thinking’ Are Redefining Consumer Financial Stability,” published in October, found that 52% of consumers expect to save more next year, yet only 24% actually increased their savings in the past six months.

In the meantime, earnings reports from major banks this quarter show continued strength in card spending and deposit activity. These patterns indicate that despite higher prices for essentials, most consumers are maintaining spending levels by adjusting how and where they spend.

The University of Michigan’s Consumer Sentiment Index, also released Friday, showed that “inflation and high prices remain at the forefront of consumers’ minds.” For the year ahead, consumers are anticipating a rise in prices of 4.6%, down from the 4.7% seen in September. Short-term inflation expectations have stabilized somewhat over the last four months after peaking at 6.6% in May. As for annualized inflation in the 5-year period ahead, forecasts adjusted up for the third consecutive time.

The inflation data, pitted against the spending activity, underscores the durability of U.S. consumers. Essentials continue to absorb a larger share of household budgets, but spending activity suggests that consumers have adapted to the higher-cost environment. For many consumers living paycheck to paycheck, inflation may be the backdrop rather than the barrier to daily financial life, which is a challenge they continue to meet with pragmatism and resilience.