Even so, the level of goods spending remains 5 percent above the level implied by its pre-pandemic trend, while services spending remains 4 percent below its trend (figure 3). In addition to the fiscal drag and tighter financial conditions, high inflation— particularly in food and gas prices—has restrained consumer spending by reducing real purchasing power.
While price increases in food and energy are weighing on discretionary spending by all Americans, they are especially hard on low-income families, who spend three-fourths of their income on necessities such as food, gas, and shelter—more than double the 31 percent for high-income households.3 Since the very elevated prices at the pump in June, the nationwide average price of a gallon of regular unleaded gasoline has declined every day throughout July and August, most recently falling below $ a gallon, according to the American Automobile Association.