Americans are burning through their financial cushion at an accelerating pace, spending faster than their income is growing, as the energy shock from the Iran war slams household budgets.

Why it matters: Consumer spending has indeed held up, defying rock-bottom sentiment readings. But there's new evidence that suggests households are increasingly drawing down savings to support their spending, a fragile dynamic for the broader economy.

What they're saying: "While prices are rising faster than comfortable, incomes are not, putting consumers in an uncomfortable spot," NerdWallet senior economist Elizabeth Renter wrote.

• "Rising prices, sluggish income and economic uncertainty could set the stage for a broader pullback in consumer spending and therefore economic growth," Renter added.

By the numbers: The personal saving rate fell to 2.6% in April, down from 3.2% in March and 4.3% in January — a sharp slide that brings it to its lowest level since mid-2022.

• Consumer spending rose 0.5%, even as disposable personal income fell 0.1%, the Commerce Department said this morning.
• That gap between how fast consumer incomes are rising and how quickly they are spending is driving the drawdown in the saving rate.
• Gasoline and energy goods were the single-largest driver of spending increases in April, one sign of how the war's energy impact is registering in household budgets.

Zoom in: The Personal Consumption Expenditures Price Index, the Federal Reserve's preferred inflation gauge, rose 0.4% in April, cooling from 0.7% in March at the height of the energy shock.

• There is still little evidence of the shock spilling over into non-energy-related categories. Core PCE, which excludes food and energy costs, gained 0.2% — cooling slightly from March.
• Still, compared with the prior year, core PCE ticked up to 3.3%, its highest level since 2023. As Fed governor Lisa Cook put it in a speech yesterday: "Inflation is clearly moving in the wrong direction."

Between the lines: Before the pandemic, Americans were saving at roughly double today's rate, though that cushion has been eroded by two consecutive inflation shocks in the span of four years.

• The personal saving rate can send very different messages about the health of the consumer and the broader economy. During the 2008 financial crisis, the saving rate climbed above 8% as households retrenched and hoarded cash. A high rate in that case was a sign of fear, not necessarily financial health.
• A low rate can signal the opposite: confidence in future income and a willingness to spend. But the makeup of April's spending increase — led by gasoline and energy goods, not discretionary purchases — undercuts that optimistic read.

The intrigue, via our colleague Matt Phillips: Real per capita disposable income — the money consumers can spend after accounting for taxes and inflation — declined 1.4% in April from a year ago. It also dropped 0.4% in March.

• These are the first consecutive negative year-over-year readings since late 2023.
• Some analysts have found that real disposable income can be a powerful predictor of election results, with increases boosting incumbents and declines helping lift challengers.

The bottom line: "Aggregate spending is still being supported by the wealth effect and the upper end of the K-shaped economy, but that support is doing more of the heavy lifting — making the overall spending backdrop look increasingly uneven and fragile," wrote Olu Sonola, Fitch Ratings' head of U.S. economics.

Decades of failures by both political parties left the U.S. strategically vulnerable, Bessent will argue in his speech tomorrow, and the Trump administration is focused on turning the tide.

Driving the news: Bessent's talk, titled "While America Slept," which invokes U.S. strategic failures before World War II, will argue that this has been an era of dangerous complacency and the deterioration of U.S. manufacturing strength, a Treasury official tells Axios.

• Bessent will argue that Washington has excessively prioritized efficiency over resilience, making the American industrial base vulnerable.
• Hollowed-out productive capacity in semiconductors, rare earths, medicines and defense goods is a strategic failure, Bessent will say, exposed by the COVID-19 pandemic and the war in Ukraine.
• He will say that the Trump administration will continue developing "trusted partner" supply chains with geopolitical allies, even amid diplomatic strains with many of those allies over tariffs, the Iran war and other friction points.

Of note: Other expected highlights from tomorrow's conference, at the Reagan Library in Simi Valley, California, include sessions with JPMorgan Chase CEO Jamie Dimon and SEC chair Paul Atkins.

• Neil will moderate a session on "New Ideas for Invigorating American Growth" that includes San Francisco Fed president Mary Daly and Business Roundtable president Kristen Silverberg, among others.
• It will all be livestreamed here.