Economic Data Round-Up: Consumer purchasing power under pressure

US consumer spending is likely to moderate because nominal resilience is masking weaker real demand, falling purchasing power and growing reliance on credit.

• April retail and food services sales rose 4.9% year over year, from 4.2% in March, but higher prices and spending by higher-income households appear to explain much of the strength.
• Real personal consumption expenditure growth slowed to 0.1% month over month in April from 0.3% in March, while year-over-year growth stalled at 2.1%; durable-goods spending remained negative.
• Consumer sentiment reached another record low in May, while average hourly earnings slowed and CPI inflation rose to 4.2% year over year, pushing real income growth into negative territory.
• Real disposable income turned negative in April alongside a declining saving rate, suggesting that some households are drawing down savings or borrowing to maintain consumption.
• Total consumer credit grew at a 4.8% annualized pace, but revolving credit accelerated to 10.4% while nonrevolving credit slowed to 2.9%; serious credit-card delinquencies reached a 15-year high.

Takeaway: MUFG expects consumption to moderate in Q2 2026 before recovering in the second half, but the recovery depends on disinflation, positive real wage growth, improving employment and reduced geopolitical and policy uncertainty.