Rising prices squeeze wallets as Americans drain savings

Inflation rose to a three-year high in April, buoyed by an oil-price shock from the Iran conflict, and Americans are draining their savings at the fastest pace since 2022. After-inflation spending was up just 0.1% as disposable income slipped, dragging the saving rate to 2.6% (the lowest in about two years) and inflation-adjusted income down 0.5%. Gas, energy and food costs led gains, while the core PCE price index rose 0.2% for the month and 3.3% annually. Economists warn the squeeze could curb discretionary spending even as GDP growth for Q1 was revised to 1.6%, with some forecasts suggesting momentum into Q2, and the Fed is expected to hold rates steady while inflation remains above target.