The good news: US inflation unexpectedly slowed in November, per the Bureau of Labor Statistics.

• The Consumer Price Index rose 2.7% YoY, which was a notable decline from the 3.0% in October, and well below the 3.1% consensus estimate.
• So-called “core inflation,” which strips out volatile food and energy prices, rose 2.6%, a marked slowdown from 3.1% the previous month.

The bad news: While headline CPI suggests inflation is easing, many everyday expenses are rising faster than the overall index.

• Electricity prices rose 6.9%.
• Renters’ or homeowners’ insurance increased 7.0%.
• Several grocery staples such as beef (up 15.8%), coffee (18.8%), and bananas (6.7%) rose sharply.
• Used car prices increased 3.6%.

Those price hikes are highly salient, making consumer perceptions about the economy–and rising costs–difficult to shake. Nearly 9 in 10 consumers (87%) say they are paying higher grocery prices, according to AP-NORC. And nearly 2 in 3 (63%) say holiday gifts are more expensive this year.

That disconnect also shows up in inflation expectations. Consumers expect inflation to run well above the Federal Reserve’s 2% target in both the short and long term, per the University of Michigan.

Why it matters: Put simply, the more prices rise, the less spending power consumers have.

• Consumers have taken note: Their assessments of their personal finances are down 12% since January, per the University of Michigan.
• Those beliefs aren’t unfounded; the employment cost index, which tracks changes in wages and benefits, grew 3.5% in September, the slowest growth since 2021, per another Bureau of Labor Statistics report. While those gains are ahead of inflation, they aren’t evenly distributed, which is why many lower- and some middle-income households are struggling to keep up.
• Roughly 3 in 10 (29%) lower-income households are living paycheck to paycheck—defined spending more than 95% of household income on necessities—up from 27.1% just two years earlier, per the Bank of America Institute.

Looking more broadly, Moody’s Ratings expects real consumer spending growth to slow to about 1.5% in 2026 as households grapple with job uncertainty and higher costs for healthcare, childcare, and other essentials like utilities and property taxes.

Our take: While one better-than-expected inflation report is a welcome bit of news, the underlying pressures facing consumers tell a different story. The expiration of Affordable Care Act enhanced tax credits, for example, will drive average out-of-pocket premiums up 114%, to well over $1,000 per person on an annual basis, per KFF. That’s a hit that most Marketplace enrollees cannot absorb, with 6 in 10 reporting they couldn’t handle even a $300 annual increase without significant strain.

In other words, easing headline inflation doesn’t negate the reality that costs are still rising in highly visible—and unavoidable—areas of household budgets. As a result, the emphasis on “value” that defined 2025 will carry well into next year, putting sustained pressure on retailers to deliver value clearly, consistently, and credibly if they hope to maintain consumer trust and spending.