Gas Prices Are Squeezing Budgets, but Shoppers Haven’t Fully Backed Off Yet

CNN, Axios, the New York Times, Reuters, Market Watch, Bloomberg, and CNBC contributed to this report.

Americans are paying more at the pump and trimming some of their spending elsewhere, but they have not slammed on the brakes just yet.

Retail sales rose 0.5% in April, the Commerce Department said Thursday, a solid gain but a step down from March’s 1.6% jump. The increase was helped by higher spending at gas stations, where sales climbed 2.8%, even as households pulled back on some bigger-ticket purchases like furniture, cars, clothing and department store items.

That split tells the story pretty well. People are still spending, but they are getting choosier. Furniture sales fell 2%, auto dealer sales slipped 0.5%, clothing stores dropped 1.5% and department stores sank 3.2%. Restaurant and bar spending, though, still rose 0.6%, which suggests Americans may be cutting back on stuff before they give up nights out.

The pressure is coming from the Iran war, which has sent fuel prices sharply higher and started working its way through the rest of the economy. Grocery bills are rising. Shipping costs are rising. And gas now averages $4.53 a gallon nationally, more than 40% above a year ago.

That is starting to show up in consumer behavior. People with tighter budgets are feeling it first, and even higher earners are getting more cautious. Some are switching to cheaper proteins, skipping extra subscriptions, and just being pickier about what they buy.

The April numbers also got a boost from tax refunds, which helped keep spending afloat. But that cushion will not last forever. Once those refunds fade, higher fuel costs will hit households without much of a buffer.

For now, the consumer is still standing. Just a little more battered, and a lot more selective.