US grocery pullback deepens even as consumer confidence shows its clearest turn in months

Household grocery budgets are showing the clearest sign yet of inflation fatigue, with shoppers buying fewer items even as prices keep climbing. But the broader consumer mood appears to be turning a corner, with sentiment readings through July posting their strongest improvement in months.

New analysis from Bain & Company and NielsenIQ found that unit sales of groceries across the US have moved into outright decline, a shift researchers describe as a new and more serious phase of the pullback.

The negative trend in units first showed up in mid-2025, but the firms say it accelerated sharply from February, with volumes now down roughly 2% year over year in most months since then, and consistently so across every US region. Shelf prices were up 2% to 3% year over year and by June, overall units sold were down 1.8% year over year, compared with growth of just 0.1% in June 2025, a deterioration of nearly two percentage points in a single year.

Bain and NielsenIQ point to a build-up of pressures rather than one single cause. A sharp drop in participation in the Supplemental Nutrition Assistance Program (SNAP) late last year hit lower-income households hardest, and that was compounded in March when gas prices jumped by 20% nationally, squeezing weekly budgets already worn down by a cumulative 33% rise in grocery prices since 2019. Broader inflation across spending categories and slowing growth in disposable income have added to the strain, the firms said.

Bain's Consumer Lab pulse survey found 80% of Americans are actively trying to spend less overall, with 28% specifically cutting back on groceries. Among that group, 56% are switching to cheaper brands, 49% are simply putting fewer items in the basket, and 44% are relying more heavily on coupons and promotions.

The firms also flagged the continued shift toward online grocery shopping, where basket sizes tend to run smaller, and growing use of GLP-1 weight-loss medications, whose users are also cutting grocery spend, as contributing factors.

While providing a snapshot of consumer spending, the data also highlights how investors in grocery industry companies should prepare for divergence.

"The data is unambiguous: US grocery is in a genuine volume contraction, and the path back to growth is not just about low prices, but a value story that shoppers believe in and come back for,” said Kurt Grichel, head of Bain & Company's Americas Retail practice and co-author of the report. “The grocers and manufacturers that invest now in sharpening that proposition will be positioned to take meaningful share once the broader, market-wide conditions affected by inflation, including from gas prices, eventually shift. Retailers that respond with precision – on assortment, promotion, and private label – will be best placed to capture the trips that are still up for grabs.”

Consumer mood brightens

Household sentiment readings are now pointing more consistently in one direction.

The University of Michigan's Surveys of Consumers put its preliminary Index of Consumer Sentiment at 54.4 for July, up 9.9% from June and still down 11.8% from a year earlier. The current conditions component rose 15.1% month over month to 54.9, while the expectations component gained 6.5% to reach 54.0. Both remain well below year-ago levels, but the monthly bounce marks a sharp reversal from the deterioration seen earlier in the year.

That improvement lines up with CivicScience's latest biweekly Economic Sentiment Index, published July 15 ahead of the June Federal Reserve meeting, which rose 1.5 points to 33.4 as inflation cooled even as hiring slowed and geopolitical tensions persisted.

Four of the index's five components improved, led by a 2.2-point rise in confidence in the broader economy to 36.2. Confidence in personal finances rose 2.1 points to 53.7, confidence in buying a home rose 2.1 points to 26.8, and confidence in making a major purchase rose 1.5 points to 23.7. The one component to fall was confidence in finding a new job, down 0.7 points to 26.5.

However, most Americans remain pessimistic about the economy as affordability concerns continue to dominate household finances ahead of the 2026 midterm elections, according to CNBC’s latest All-America Economic CNBC’s latest All-America Economic Survey.