Household financial pressure is increasingly showing up at the grocery store, where more Americans are relying on debt and savings to pay for food, according to a new Urban Institute study released Monday. The nonpartisan think tank found that more than one-quarter of working-age adults who used credit cards to buy groceries either could not pay their balance in full or missed the minimum payment. This trend highlights growing financial distress as food affordability becomes a primary concern for U.S. households.

Grocery Costs and Payment Struggles

The Urban Institute said grocery prices have climbed 32% over the past five years. The findings are based on a December survey of 7,500 adults between the ages of 18 and 64. About one in 10 adults relied on buy now, pay later loans to cover grocery purchases, and roughly one-third of those borrowers missed a payment during the past year. Around 20% of working-age adults also said they had dipped into long-term savings, including emergency funds, at least once in the previous 12 months to pay for groceries.

Rising Financial Distress

Kassandra Martinchek, a public policy expert at the Urban Institute and co-author of the study, noted that households face the added burden of repaying debt, which could make it more difficult to regain financial stability. The study found that the share of working-age adults who missed a minimum credit card payment after using the card for groceries increased by 1.6 percentage points since 2023. Martinchek indicated that even a relatively small increase represents millions more Americans struggling to meet minimum payments.

Financial stress was particularly severe among lower-income households. About 12% of low- and middle-income adults who used credit cards to pay for groceries missed a minimum payment last year, roughly three times the rate among higher-income consumers. Lower-income borrowers were also about four times more likely to miss a buy now, pay later payment.

Broader Economic Indicators

The findings add to broader signs of financial pressure on U.S. households. Earlier this year, data highlighted by The Kobeissi Letter showed serious credit card delinquencies climbed to 13.1% in the first quarter, the highest level since 2010. Separately, research published by the Federal Reserve Bank of New York found more households were dipping into savings to cover everyday expenses while food insecurity continued to rise.

The report also noted that enrollment in the Supplemental Nutrition Assistance Program (SNAP) declined over the past year following stricter federal work requirements, with about 37 million people enrolled as of March. Food prices could also remain under pressure, as the U.S. Department of Agriculture projected the weakest U.S. wheat harvest since 1972.

Cathie Wood, CEO of ARK Invest, said artificial intelligence-driven productivity could push long-term interest rates lower, drawing parallels with the Industrial Revolution as companies pass efficiency gains on to consumers through lower prices. In a video posted on X, Wood said AI is beginning to influence the broader economy, making productivity growth an increasingly important driver of inflation and interest rates. “If productivity growth was so strong that companies were able to pass along some of the efficiency gains into lower prices… I wouldn’t be surprised to see long rates coming down,” Wood said.

Wood compared the potential impact of AI with the Industrial Revolution, noting that long-term interest rates trended lower over that period despite repeated boom-and-bust cycles and before the creation of the Federal Reserve. She said the current AI wave could follow a similar path if productivity gains become widespread enough to offset inflationary pressures across the broader economy.

Wood’s comments contrast with a recent outlook from Morgan Stanley. The bank said AI could keep U.S. interest rates above post-2008 financial crisis levels if the technology boosts productivity without triggering widespread job losses. Morgan Stanley’s baseline assumes AI spreads through the economy roughly twice as fast as the internet, though it would still take about a decade or more to fully reshape production. The firm’s baseline also does not assume widespread labor market disruption, with Chief U.S. Economist Michael Gapen saying AI is expected to diffuse gradually enough for the U.S. economy to rebalance workers without large-scale layoffs.

Divergent Views on Inflation

The Federal Reserve has said AI-related demand was contributing to inflationary pressures and any productivity gains from the technology would likely take time to materialize. The International Monetary Fund similarly said AI was supporting the global economy, although its baseline forecasts do not yet assume productivity gains from the technology. Robert Feldman, Senior Advisor at Morgan Stanley MUFG Securities, noted that Japan faces a different challenge, with AI viewed primarily as a way to ease persistent labor shortages rather than replace workers.