Americans Spend 46.9% of Budgets on Food and Housing, a 15-Year High

Housing and food consumed 46.9% of average American household spending in 2025 — the biggest share in 15 years, according to the U.S. Bureau of Labor Statistics' annual Consumer Expenditures Report. That squeeze left little room for anything resembling quality of life, and the pressure hasn't eased since.

The two essentials categories grew faster than overall inflation. Housing expenditures climbed 5.8% year over year, food spending rose 4.6%, while CPI for All Urban Consumers increased just 2.6% in 2025. That gap is the story: the stuff nobody can skip is inflating faster than the stuff you can.

What did the average household actually pay?

The numbers translate to roughly $2,315 a month for housing and $886 a month for food. Specifically:

• Housing: $27,790 in 2025, up from $26,266 in 2024
• Food: $10,633 in 2025, up from $10,169 the prior year
• Shelter costs within housing rose 8%; rented dwellings jumped 10.8%, owned dwellings 7.3%
• Meat, poultry, fish and egg spending surged 11.7%, a major driver of the food increase

So what does this change for the average reader? It means wage gains are getting absorbed by rent and groceries before they ever reach discretionary spending — a structural problem for any business selling anything beyond essentials.

Sentiment is scraping historic lows

The University of Michigan's October consumer sentiment index sat at 48.0, barely moved from September's 48.1 but down 10.4% from October 2025's 53.6. It was the second-lowest reading in the survey's history, behind the record low of 44.8 set in May. The current economic conditions index fell 8.3%, from 50.9 to 46.7.

Joanne Hsu, director of the University of Michigan's Surveys of Consumers, said: "This month's decline in the Current Conditions subindex was driven entirely by buying conditions for durable goods, which plunged 18% on the basis of higher interest rates and rising concerns about the affordability of such purchases." She added that sentiment is "now 10% below a year ago and 15% below February, just prior to the Iran conflict."

The pressure carried straight into 2026

The Urban Institute's October tracker found 49% of people in American families lacked the resources to cover the true costs of essential expenses and live securely in their communities. "Affordability has become a central issue in American political discourse and in the everyday lives of millions of Americans struggling to get by and get ahead," the report read. It noted that nearly four out of five Americans are pessimistic about economic conditions improving in 2026.

The compounding is brutal at the household level. Renters pay about $710 more per month for housing than in 2017. Families with two young children face an additional $6,600 in annual childcare costs compared with a decade ago.

A Pew Research Center survey conducted between July and August found 44% of U.S. adults experienced at least one financial hardship across medical care, daily transportation, rent and mortgages, or food bank use. Among lower-income adults, that figure hit 71%, versus 39% of middle-income and 13% of upper-income adults.

Expenses outrun income at the bottom

The BLS report shows households in the bottom two income quintiles — those making less than about $60,000 — spend more annually than they earn before taxes. The lowest quintile made $18,125 in pretax income against $37,935 in annual expenditures, more than double.

To be fair, incomes did rise: average pretax income climbed 6.4% to $110,847 in 2025, outpacing the 4.3% rise in average spending to $81,905. The averages, though, hide the distribution problem the quintile data exposes.

Healthcare, utilities and the gas wildcard

Healthcare spending rose 4.4%, from $6,197 to $6,470 — about $540 a month, with roughly two-thirds going to health insurance alone. Premiums climbed 6.3%, from $4,055 to $4,310 annually.

Utilities ran about $411 a month, up 4.1%. Transportation, the second-largest spending category, rose a modest 1.3%, with gasoline and other fuel spending actually falling 5.4% — but the BLS report covers calendar year 2025, so the gasoline price hikes from the war on Iran aren't in these figures. The Energy Information Administration put 2025's average gas price at $3.10, versus a forecast $3.91 average for 2026.

If that fuel forecast holds, the one category where consumers caught a break in 2025 is set to reverse — meaning the essentials squeeze documented by the BLS will likely tighten, not loosen, in the year ahead.