For millions of consumers, surviving this economy is no longer about opening the wallet less often or drawing the purse strings ever tighter.
It’s about finding more ways to keep up.
The latest spending and income data suggest the Cutback Economy is moving into a more fragile phase. New figures from the Bureau of Economic Analysis released Thursday (May 28) show that personal spending rose 0.5% in April, even as disposable income was effectively flat. The personal savings rate fell to 2.6%, its lowest level in four years. Consumers are still spending, but increasingly without the income growth or savings cushion that previously helped absorb rising costs.
That backdrop makes the findings in PYMNTS Intelligence’s consumer survey, as part of The Cutback Economy Series: How Consumers Spend, more urgent. The gap between what households are trying and what is actually working is widening as inflation remains elevated and essentials continue to absorb more of the monthly budget.
Real spending on durable goods has now slipped below year-ago levels, while gasoline and housing costs continue to pressure household cash flow. In that environment, simply cutting back is proving less effective for consumers already operating with fewer financial buffers.
PYMNTS Intelligence found that 80% of Pressure-Driven Cutback Consumers in the United States reduced their everyday spending last quarter. Only 1 in 6 said it actually worked. The gap between effort and results is the defining feature of the Cutback Economy, and it matters more today than when the survey was taken in early April.
Since then, inflation has climbed to 3.8%, gas has crossed $4.55 a gallon, and the Producer Price Index shows the Iran war is raising business costs at a pace not seen in four years. Companies are passing those costs along. Data showed that 34% of large firms already are, up from 13% a year ago.
A PYMNTS Intelligence survey of 2,283 U.S. adults revealed a consumer population that’s doing something (only 5% sat still) but stuck using just two moves that reduce spending without solving the problem behind it. The people getting better results aren’t under less pressure. They’re just trying more things.
Two Moves and a Prayer
For Pressure-Driven Cutback Consumers, the playbook comes down to two things. The survey found that 79% of consumers cut everyday spending and 62% avoid big purchases. Everything else falls off fast. Only 17% added an income source. Only 9% negotiated a bill. Only 8% used buy now, pay later (BNPL). Borrowing from family, at 18%, rounded out the top three, and it’s an informal favor, not a financial strategy.
The survey revealed that 98% of this group took at least one step. Nobody’s sitting still. But nearly everyone’s spending less and hoping it’s enough. Their self-rated effectiveness score of 2.1 out of 10 says it isn’t. When the costs being cut keep rising because of fuel-driven supply chain price increases, cutting harder just means falling further behind.
The generational picture adds color. Pressure-Driven baby boomers cut at 84% and borrowed from family at just 9%. Pressure-Driven Generation Z consumers cut at 64% but borrowed from family at 34%. Older consumers put all their eggs in one basket. Younger ones spread across a wider but informal network. Neither approach is delivering. Effectiveness ratings barely move across generations, ranging from 15% to 24%.
Fighting Back Gets Better Results
The Fighting-Back Consumers, the 21% of adults who used at least two active strategies beyond cutting, tell a different story. They cut at nearly the same rate (65%) but added other moves on top. The survey showed that 67% added income sources, 55% negotiated bills, and 48% used BNPL to manage cash flow.
The result is that 35% rated their coping as very or extremely effective, compared to 19% for Pressure-Driven Cutback Consumers. But even this group only gave their strategies a 4.6 out of 10. In an environment where gas is up more than 40% year over year, food inflation is speeding up, and companies are raising prices even on goods not directly hit by tariffs, no combination of tools is making things comfortable.
Here’s the part that stands out. Fighting-Back Consumers aren’t the least pressured group. They’re the most pressured. Their challenge rates across daily living, debt, housing and healthcare all run higher than Pressure-Driven Cutback Consumers. Millennials make up 40% of this segment, and 82% live paycheck to paycheck despite higher incomes. These aren’t comfortable people using tools from a position of strength. They’re squeezed and fighting to stay above water.
Buy Now, Pay Later Is a Planning Tool, Not a Panic Button
One of the more surprising findings is that BNPL use as a coping tool was highest among Fighting-Back Consumers at 48%, not Pressure-Driven Cutback Consumers at 8%. The group under the most financial strain reached for it the least.
This challenges the idea that BNPL is something people grab when they’ve run out of options. Fighting-Back Consumers own BNPL accounts at 37% and use them as part of a plan. Pressure-Driven Cutback Consumers own them at 14% and mostly leave them alone, even under stress. In this data, BNPL works like a cash flow timing tool, not a last resort.
Boomers who were Fighting Back used BNPL to cope at 49%. Pressure-Driven boomers used it at 11%. Same generation, same $4.55 gas, completely different relationship with the tool.
Selective Cutback Consumers Are More Fragile Than They Look
The largest group in the data, the 45% of consumers classified as Selective Cutback Consumers, kept spending flat or grew it, and 64% reported no change in savings. They look fine on the surface, but stability in this environment is fragile.
Goldman Sachs has twice revised down its expectations for discretionary spending this year, pointing to higher energy and food costs. If grocery inflation reaches the 4% to 4.5% that some economists expect, this group, many of whom didn’t take active coping steps at all, has the most room to fall.
What People Still Protect
Even across these three groups, one thing stays constant. Consumers under the most pressure still protect entertainment, dining out and pet care. The Cutback Economy isn’t a story of total retreat. It’s a story of people deciding what matters and holding onto it, even when the math barely works.
The difference between getting by and going under isn’t about cutting more. It’s about having more ways to respond. Fighting-Back Consumers spread their effort across income, negotiation and payment tools, and they get modestly better results even though they face more pressure. Pressure-Driven Cutback Consumers are just as active but stuck with fewer options. With the Iran war’s energy shock still moving through food, shipping and consumer goods, closing that gap isn’t just an opportunity. It’s becoming urgent.
Read more:
Inflation Hits Every Generation. But Not in the Same Place.
The Cutback Economy Spares Pets, Streaming and Dinner Out
