Bernstein: US consumer spending remained resilient in the third quarter as inflation widened differences between income groups

Why is spending resilient while confidence is weakening?

US CPI rose 3.7% year over year in September, and gasoline inflation was also high: gasoline prices across regions rose 27%–33% year over year in the third quarter. Although increases moderated from the second quarter in most regions, they remained pronounced.
Real wages continue to grow, supporting consumption; however, consumer confidence is declining across all income groups, and the confidence gap between higher- and lower-income groups is widening. Nominal wage growth for lower-income earners is below average, and energy accounts for a larger share of their spending.
Aggregate resilience has another side: the report shows that year-over-year growth in US household savings has turned negative. Total spending under the food assistance program SNAP has declined since October 2025, partly because changes in employment requirements for people aged 55–65 reduced the number of eligible recipients.

Bernstein expects inflationary pressure to persist and consumers to remain price-conscious. During periods of rising gasoline prices, traffic growth at Costco and dollar stores was strong: the former offers cheaper gasoline, while the latter allow consumers to shop nearby and save on fuel.
Sales of food retailers’ private-label products have continued to grow year over year since the beginning of 2025, reflecting consumers’ price sensitivity; however, the rate of year-over-year sales growth has slowed somewhat in recent months.
Beyond retailers, Bernstein believes higher diesel costs will disrupt food distribution in the short term, but could also strengthen large distributors’ scale advantages, helping them gain share and increase private-label penetration.

Year-over-year growth in food-at-home prices recently fell from 2.7% to 1.8%, well below inflation in food-away-from-home prices. Bernstein believes input costs, including protein and transportation, remain high, and food price inflation may remain positive.
Restaurants continue to face pressure from declining consumer affordability and persistent inflation. Bernstein believes that if the gap between price increases for food at home and dining out narrows and inflationary pressure eases, the improved relative value of dining out could support a recovery in restaurant spending.
Among restaurant companies, Bernstein favors Darden because its customers skew toward higher-income groups and its value for money has improved.

As of 29 October, the US 30-year fixed mortgage rate had risen to 7.2%. Home transaction volumes were well below pre-pandemic levels and had not improved significantly over the past 12 months. Bernstein expects home improvement spending growth to be low, at zero to 1.5%, over the next 6–9 months.
The firm’s model uses furniture and durable household equipment in personal consumption expenditures as a proxy for home improvement spending and incorporates home prices, real disposable income, mortgage rates and home transaction volumes in its forecasts. Recently, inflation has driven low- to mid-single-digit growth in the proxy, above actual sales growth in the home improvement industry.
The automotive aftermarket, meanwhile, is supported by an aging vehicle fleet: the average age of light vehicles in operation in the US rose from 8.9 years in 2000 to 12.8 years in 2025, and mileage has also recovered above pre-pandemic levels. At the same time, Bernstein believes gasoline inflation is negatively affecting consumer sentiment and demand for auto parts retailers.

Growth in non-alcoholic beverages is recovering but remains below its level in the first quarter of 2026; Bernstein believes beverages have stronger pricing power than household and personal care products.
Rolling 12-week sales of health and beauty products continued to grow 4%–5% year over year, with volume growth accelerating as price increases slowed. Household care products also accelerated as volume growth picked up, while baby and pet care products lagged relatively behind.