Inflation Cools Overall But Consumers Stay Value-Driven

After weeks of a government shutdown, economic data continue to roll in, and the latest inflation figures sketch a picture that is far from definitive.

In a nutshell, and per Bureau of Labor Statistics data from Thursday (Dec. 18), price growth is cooling overall but leaving consumers still contending with higher costs for everyday essentials.

For households, the read-across is nuanced. Slowing inflation does not feel like falling prices, and for many consumers, budgets remain under pressure, as PYMNTS Intelligence has found. That disconnect is shaping spending decisions, payment choices and brand loyalty.

Headline Inflation Shows Signs of Cooling

The Consumer Price Index rose 2.7% year over year in November, signaling that inflation has continued to decelerate from earlier highs, as seen in the accompanying chart.

Measures that strip out more volatile components also showed moderation, pointing to broader cooling rather than isolated declines. Still, for consumers, inflation remains a lived experience measured less by percentages and more by grocery receipts and retail prices.

Food and Beverages Keep Budgets Tight

Food and beverage prices rose 2.6% over the past 12 months, continuing to weigh on household budgets. Food at home increased 1.9%, with meats, poultry, fish and eggs up 4.7%, even as egg prices fell sharply, underscoring uneven relief within the same category.

Dairy prices declined 1.6% and fruit and vegetable prices were nearly flat, but those modest offsets did little to change the overall perception that grocery shopping remains more expensive.

Food away from home rose 3.7%, reinforcing why dining out remains a discretionary choice many households are limiting, as recent earnings reports from the likes of McDonald’s and others have shown.

Retail Prices Reinforce Cautious Spending

Retail categories tell a similar story. Furniture and bedding prices rose 3% year over year, while motor vehicle parts and equipment increased 2.6%, keeping replacement and maintenance costs elevated. Appliances and apparel posted marginal increases of 0.5% and 0.2%, respectively, while sporting goods declined slightly, extending a long stretch without annual price increases.

Value-Driven Consumers Redefine Spending Behavior

This pricing landscape helps explain why consumers remain firmly value-driven. Spending decisions are becoming more deliberate. Consumers are prioritizing essentials, scrutinizing price differences across channels and increasingly choosing where and how to pay based on perceived value.

The persistence of value-driven behavior is reinforced by savings data from the PYMNTS Intelligence Paycheck-to-Paycheck reports. Savings rates remain thin, leaving many households without meaningful buffers even as inflation cools. For these consumers, slower price growth does not translate into financial comfort, at least for the moment.

Our recent surveys indicate that that among struggling households more than 1 in 3 consumers (34%) who live paycheck to paycheck but struggle to pay their bills report spending more than usual in the past six months, which in turn has impacted savings.

As reported here, the cost of food has been a key stressor cited by 56% of consumers queried by PYMNTS Intelligence. “Additionally, 55% say the same of inflation, and 23% say rising costs are their greatest source of financial stress,” per that report.

Taken together, the latest inflation data suggest momentum in the right direction, but consumer behavior tells a more restrained story.