Low-income Americans are pulling back on spending, often saying no to eating out, traveling, and even cutting back on basics like diapers, fizzy drinks, and beer, as import duties continue to push prices higher.In response, many fast-food chains are now offering cheaper, smaller meal bundles to keep demand steady.Researchers at Yale’s Budget Lab and the Foundation for Research on Equal Opportunity say the brunt of these price increases is likely to fall on the poorest Americans, as importers pass on the costs to consumers.According to recent earnings reports and executive commentary cited by Reuters, consumers are increasingly turning to bargains.Industry experts have warned that companies may need to cut into profits, as relying on price hikes to boost revenue is becoming unsustainable.Executives from Procter & Gamble, Coca-Cola, and Chipotle Mexican Grill say consumers are becoming more bargain-conscious as inflation persists and recent tariff hikes under US President Donald Trump begin to affect everyday goods.“It does feel like there are certain cohorts of the consumer, definitely on the lower-income side, that are feeling pressure right now,” Chipotle’s Chief Financial Officer Adam Rymer told Reuters.Procter & Gamble noted that Trump’s tariffs have already raised the cost of some of its products.Definitions of “low income” vary by location and family size. Bank of America, the country’s second-largest consumer-facing bank, classifies those earning $50,000 or less as “lower income” and more likely to live paycheck to paycheck.Chipotle uses a slightly higher threshold of $75,000, while Coca-Cola considers households earning under $40,000 as low-income.Chipotle said it would keep the financial strain on its lower-income customers in mind when considering future price increases.Seen as a bellwether for consumer products, P&G offered a cautious outlook for its fiscal year, citing multiple pressures on consumer spending: Trump’s tariffs, immigration crackdowns, high interest rates, and sustained inflation.Coca-Cola is responding by promoting more affordable options for budget-conscious shoppers, according to CEO James Quincey.Molson Coors also reported a shift in consumer behavior, with more buyers seeking smaller, cheaper pack sizes.With the cost of essentials like Hershey’s chocolate and Tide detergent rising, and cuts to federal food aid programs looming, many households are feeling the squeeze. Pandemic-era savings have largely been depleted.“Re-engaging the low-income consumer is critical, as they typically visit our restaurants more frequently than middle- and high-income consumers,” said McDonald’s CEO Chris Kempczinski.He noted a double-digit decline in fast-food visits from lower-income earners compared to last year, adding that weaker jobs growth in July has made them even more cautious.Analysts are observing the same caution during major seasonal shopping events, including back-to-school sales. Dana Telsey of Telsey Advisory Group pointed to diminished enthusiasm among budget-conscious households.Bank of America data shows that credit card spending by low-income consumers dropped in the three months to June compared to the previous year, even as spending among middle- and higher-income groups rose. While a strong labor market has provided some cushion, analysts and executives warn that pressure is mounting, Reuters reported.Fast-food chains are now scrambling to offer better deals. While $5 bundles are being promoted, households are still hunting for deeper discounts. McDonald’s said its reintroduced $2.99 snack wrap has shown “encouraging” results.Taco Bell’s $1 to $3 menu items — including sodas and burritos, have helped sustain demand. However, Yum Brands, which owns Pizza Hut and KFC, reported weaker sales for their higher-priced pizzas and chicken buckets.Kraft Heinz has said it does not expect consumer sentiment to improve this year and is rolling out larger, value-focused pack sizes to ease pressure on shoppers.“We also have a consumer who, unlike a few years ago when inflation was peaking, doesn’t have savings built up in the same way they did in 2022 and 2023,” said Katherine Cullen, Vice President of Industry and Consumer Insights at the National Retail Federation (NRF).“We see that particularly among lower-income consumers.”As the economic fallout from the tariffs continues, it’s clear that US consumers — particularly the most vulnerable — are being forced to make difficult choices about where and how they spend.
