The strength of U.S. consumer spending could falter heading into the holidays as rising healthcare costs, the loss of food benefits, and job market uncertainty squeeze lower-income households, according to Reuters. Economists warn that the ongoing government shutdown and expiring health insurance subsidies may sharply limit spending that typically drives the economy during the final quarter of the year.
Federal Reserve officials are watching closely as families face compounding financial stress. The shutdown has already disrupted SNAP food assistance for 42 million Americans, while Affordable Care Act subsidies are set to expire at year’s end unless Congress acts. Economists say the lapse could raise annual insurance costs by more than $1,000 per person and slow growth by up to one percentage point this quarter.
“The economy is resilient, but it’s going to face a test here at the turn of the year,” said RSM chief economist Joseph Brusuelas, citing layoffs, inflation, and stalled wages. Fed Chair Jerome Powell recently noted the “K-shaped” economy—where wealthier Americans continue spending freely while lower-income consumers cut back amid rising debt and shrinking savings.
Although strong stock markets and potential tax refunds could buoy some households in early 2026, analysts say the economic divide is widening. Research from JPMorganChase shows income growth for workers aged 25 to 54 has slowed to 2% annually, down from 3% in recent years. With holiday shoppers planning to spend less and millions facing uncertainty over benefits, economists warn that the next few months could reveal whether consumer spending can continue propping up U.S. growth.
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