According to a recent report by Fitch Ratings, consumer spending in the United States remains robust, but inflationary pressures are diminishing real income growth and reducing the financial buffer for consumers. Sustained lower oil prices may alleviate some financial strain, while a stable labor market and healthy household balance sheets are expected to keep the economic slowdown contained, albeit unevenly, through the latter half of 2026.
Olu Sonola, the Head of U.S. Economics at Fitch Ratings, noted, “While consumption has not declined significantly, the support from real income has diminished due to rising inflation.” He added that although household financial situations are generally strong, the reduced savings rates indicate that spending growth may become increasingly inconsistent.
In the first quarter of 2026, real consumer spending growth slowed to an annualized rate of 1.4% quarter-over-quarter, down from an average of 2.6% in 2025. While retail sales in May showed signs of resilience, inflation-adjusted purchasing power continues to be pressured, suggesting a likely deceleration in consumption growth. Fitch projects consumer spending growth to decrease to 1.7% in 2026.
Income trends are a contributing factor to this slowdown. In April 2026, the year-over-year growth of nominal disposable personal income fell to 2.6%, down from 5.1% the previous year, while real disposable income experienced a decline of 1.1% compared to a 2.8% increase a year prior. Additionally, the Consumer Price Index (CPI) inflation increased to 4.2% in May from 3.8% in April, leading Fitch to adjust its end-2026 CPI forecast upward from 3.0% to 3.7%.
Household wealth continues to play a crucial role in economic support, particularly for higher-income groups, with equity market gains pushing net worth to approximately 803% of disposable income in the first quarter of 2026. However, the savings rate dropped to 2.6% in April, which may hinder households’ ability to cope with rising prices.
Although debt-service levels remain manageable and mortgage delinquencies are stable, there are rising concerns over delinquency rates for auto loans and credit cards, indicating certain areas of financial strain. Higher-income households are expected to benefit from positive wealth effects, whereas those in lower and middle-income brackets are likely to experience more significant challenges due to increased living expenses and borrowing costs, leading to uneven spending patterns throughout 2026.
