Household disposable income after spending on essential items, taxes, and debt service is at its lowest level since 2011, when the series compiled by Tendências Consultoria begins.

In February, the amount “left over” from households’ broader income mass after covering those expenses was 21%, the consultancy said. At the start of 2024, it was 23.6%. That is a very significant deterioration in a short period, said Alessandra Ribeiro, partner and director of macroeconomics and sector analysis. The indicator peaked in March 2011, at 27.2%, and again in June 2020, at 27%.

The indicator starts with households’ broader income mass, which includes wages as well as other sources such as pensions, social benefits, rent, and dividends. From that total, Tendências deducts inflation on essential items in housing, including rent and fees, fuels and energy such as cooking gas and electricity bills; transportation, including public transport and vehicle fuel; health and personal care, including pharmaceutical and optical products and health services; communications; education; and food consumed at home. The calculation considers the changes and weights of the IPCA, Brazil’s benchmark inflation index.

It also deducts interest and principal payments on debt, based on the average of credit lines tracked by the Central Bank. But Tendências makes adjustments, including classifying credit-card installment purchases as credit. Finally, data from the Federal Revenue Service are used to deduct income tax and social security contributions. “It is an indicator of what is left for other types of consumption,” Ribeiro said.

The sharp decline in disposable income, especially since 2025, has been driven by higher debt-service costs, she said. “We see a very significant increase in how much credit payments are eating into income, while food, which has a very relevant weight, alleviated inflation a lot in 2025,” she said.

In 2025, the price of food consumed at home rose 1.43%, while headline inflation was 4.26%. In the 12 months through March 2026, food consumed at home rose 0.53%, compared with a 4.14% increase in the IPCA.

Higher rates

The backdrop for the heavier debt burden in household budgets is interest rates, Ribeiro said. “It is a scenario of high interest rates for a long time,” she said. “Throughout 2025, we saw a clear deterioration in the quality of household credit portfolios, with families turning more to emergency credit lines such as revolving credit cards and overdrafts. When people move into those lines, they pay higher interest rates.”

That is compounded by tighter credit supply, as banks have also become more cautious amid rising delinquency. “With this combination, even a strong labor market has not been enough to offset this financial burden.”

Household debt was close to half, 49.7%, of Gross National Disposable Income in January this year, noted Marcelo Gazzano, an economist at Bradesco. The figure is low compared with other countries, he said, since household credit in Brazil as a share of GDP is about 10 percentage points below the average for emerging economies, based on data from the Bank for International Settlements (BIS). Still, Brazilian household debt is almost twice the level seen in 2007, he noted.

Bradesco estimates that, all else being equal, a 1% increase in the stock of household credit also raises the share of income committed to debt payments by 1%.

Over the past two years, household debt has increased by 2 percentage points, with half of that growth explained by the expansion of non-payroll-deductible personal credit, Gazzano said.

Vehicle financing also increased and now accounts for almost 6% of household income. Payroll-deductible loans for private-sector workers, boosted in 2025, represented 1.2% of income in January 2026, Gazzano said.

He also noted that the Central Bank’s Credit Cost Indicator reached 37.5% a year in February, the highest rate since 2013. That rate is about 4.5 percentage points higher than at the end of 2024, Gazzano said.

Political campaigns

Ultimately, Tendências’ disposable-income indicator is a measure of well-being that helps explain other developments, such as the worsening evaluation of the government despite a dynamic labor market and a strong increase in income mass, Ribeiro said. “We can understand where this discomfort is coming from.”

Part of the movement is also related to the large-scale entry of more low-income families into the banking system, driven by the pandemic and by innovations such as Pix, Brazil’s instant-payment system, and fintechs.

“We are still thinking about how to measure this type of effect, which obviously has a positive side. But our assessment is that the problem of high debt is indeed being amplified by this rapid inclusion of households without a foundation in financial education,” she said.

Household debt and the perception that purchasing power has fallen over the past year have taken on a central role in shaping the pre-presidential campaign strategies of President Luiz Inácio Lula da Silva, of the Workers’ Party, and Senator Flávio Bolsonaro, of the Liberal Party of Rio de Janeiro. Flávio–son of former President Jair Bolsonaro–has been using the higher cost of living to appeal to undecided voters.

The government is preparing a new program to refinance debts at lower costs, a kind of “Desenrola 2.0,” which could bring some short-term relief, Ribeiro said. In her view, the initiative makes sense in a context of high delinquency and given the availability of resources in the Operations Guarantee Fund (FGO), although it needs greater alignment with banks than the first version did so that renegotiation mechanisms are truly effective.

“But it is a completely short-term solution. It will not resolve the dynamics over time when we think about the inclusion of low-income people in the banking system unless it comes with a more structural financial-education agenda,” Ribeiro said. “The risk is having to do another program again soon,” she said.

Fiscal concerns

In structural terms, Brazil also needs to resolve its systematic problem of high interest rates, especially to navigate shocks such as the war in the Middle East with more room to maneuver, Ribeiro noted. “We now face the risk that interest rates will stay higher than we had imagined, given the effects of the conflict. This situation for families should remain tight for some time.”

Brazil’s structural problem of high interest rates, in turn, is linked to the fiscal issue. Ribeiro said. In her view, it is important that, starting in 2027, reforms are advanced to improve the dynamics of mandatory spending, while the country continues to close loopholes that lead to revenue losses, such as tax expenditures. “The efficiency of many of those lines is questionable,” Ribeiro said.

If Brazil can send some signal from next year onward that debt dynamics will be stable through 2030, it will already be possible to reduce the risk premium charged to the country, which would have a benign effect on financial variables and the base rate Selic, she said.