New Data Shows Working Families’ Purchasing Power Falters as Paychecks Pushed to Breaking Point

New Data Shows Working Families’ Purchasing Power Falters as Paychecks Pushed to Breaking Point

Trump’s war in Iran stifles growth across the economy while Americans are forced to dip into savings to cover rising price of essentials

While Trump convened his Cabinet in a desperate attempt to clean up his own war in Iran, working families across the country are barely making ends meet thanks to the economic consequences of the conflict. Today’s Personal Consumption Expenditure (PCE) report from the Bureau of Economic Analysis (BEA) shows that the PCE Price Index climbed to 3.8% between April 2025 and April 2026, the highest since May 2023. The BEA also released its second estimate of GDP growth for the first quarter of 2026, revising the annual rate down to 1.6% from its 2% preliminary estimate. This follows a dismal 0.5% growth rate in the final quarter of 2025 and just 1.1% average annualized growth over the past two quarters.

Trump’s economic agenda is contributing to a combination of slower growth and higher prices. Tariffs are continuing to push up the price of consumer goods, while Trump’s war in Iran has kept gasoline prices near four-year highs at $4.43 per gallon nationally. These rising prices are eroding household purchasing power and weighing on consumer spending. This month’s data reflects the average household’s struggle to get ahead: April saw the largest drop in real disposable income since October 2022, and the lowest personal savings rate since June 2022.

Groundwork’s Chief Economist Breyon Williams released the following statement:

“Today’s reports confirm what this month’s inflation data already made clear: prices remain stubbornly high because President Trump refuses to bring down the cost of living for working families. Trump is making Americans pay more, first via his tariffs and now because of his war in Iran, causing prices at the pump to skyrocket. At the same time, he remains fixated on his lavish billion-dollar ballroom that the taxpayers will fund and a $1.8 billion slush fund for his supporters.”

BACKGROUND

Paychecks are not keeping up with prices. 

• PCE inflation rose 0.4% in April alone and 3.8% over the past year, well above the Fed’s 2% inflation target.
  • The largest monthly price jumps hit consumers at the pump, with gasoline and other energy goods up 5.5%, as a result of Trump’s war in Iran. Prices are also increasing more broadly, with recreational goods and vehicles up 3.9% in April alone, housing and utilities increasing 0.6%, and clothing and footwear, a tariff-exposed category, increasing 0.4%.
  • April also saw the largest monthly price increase in food since November 2022, up 0.5%.
• Americans’ spending power continued to erode in April. Personal income held flat, trailing PCE inflation. Real disposable personal income declined by 0.5% over the past month and is now 1.1% lower than a year ago, the largest annual drop since October 2022.

Household spending is stagnating as prices continue to rise.

• Consumer spending is losing momentum amid Trump’s chaotic tariffs and his war in Iran. Real consumer spending was essentially flat in April, rising only 0.1%, while the annual growth rate has slowed to 2.1% in April, decelerating from 2.6% as recently as February. Consumers are feeling the squeeze of high prices.
  • The Conference Board’s May Consumer Confidence report showed that two-thirds of consumers said they were cutting back on overall spending because of rising prices.
• Even as the rate of spending slows, households are tapping into their savings to cover the basics. The personal savings rate fell to 2.6% in April, down from 3.6% and the lowest since June 2022, as PCE prices climbed 0.4% against a 0.1% decrease in disposable income.