Japan’s consumption resilience stands out, while G10 consumption momentum faces real-income headwinds

Overview

This report is Goldman Sachs’ update to its G10 consumer dashboard, focusing on consumer health across developed economies. It finds that G10 consumers overall continue to benefit from healthy household balance sheets, but labor-market performance is more divergent and consumer confidence remains subdued. Although confidence rebounded somewhat following US-Iran-related events, rising energy prices are eroding real incomes and are expected to weigh on consumption growth in the second half of 2026. Japan shows the greatest resilience, supported by government price controls that buffer the energy shock, elevated wage growth, and strong balance sheets.

Core views

First, household balance sheets remain the main buffer for G10 consumption, with net wealth-to-income ratios in the US, Japan, and Australia near historical highs. Second, real income is the key drag on consumption in the second half of the year, while Europe may face more delayed pressure from the pass-through of gas and electricity prices. Third, although consumer confidence has rebounded in some markets, low-income groups remain more affected by energy costs. Fourth, the consumer-health ranking shows Japan and the Eurozone as relatively strong, Australia in the middle, the US and UK weaker, and Canada weakest. Fifth, the report expects US consumption growth to slow as real-income headwinds and normalization of the savings rate take effect.

Analysis framework

The report uses a cross-country, indicator-level percentile framework to measure consumer health, covering real consumption growth, the unemployment gap, consumer confidence, real-income growth, debt-service ratios, real net-wealth growth, and the net wealth-to-income ratio. For high-frequency or missing data, it uses nowcasts or carries forward the previous period’s value, then combines the indicators into a consumer-health proxy weighted by frequency, timeliness, and volatility.

Methodology notes

• Macroeconomic consumer-health assessmentG10 Consumer Health Indicator

  Composite percentile indicator

  The report converts each country’s consumption, employment, income, confidence, wealth, and debt indicators into percentiles of their historical distributions, with higher percentiles representing healthier consumer conditions. The unemployment gap and debt-service ratio use inverse percentiles, so lower unemployment and lower debt-service pressure correspond to higher scores.

• Indicator weightingWeighted average percentile

  Weights based on frequency, timeliness, and volatility

  The composite indicator weights real consumption growth at 20%, the unemployment gap at 20%, consumer confidence at 20%, real-income growth at 15%, the debt-service ratio at 10%, real net-wealth growth at 10%, and the net wealth-to-income ratio at 5%.

• Data processingNowcast and carry-forward of missing values

  Estimating unreleased data or carrying forward the previous period

  When the latest monthly or quarterly data have not yet been released, the report uses high-frequency predictive variables for nowcasting; if a variable is unobserved or cannot be nowcast, it is assumed to be unchanged from the previous month when calculating the weighted average.

• Cross-country comparability adjustmentExclusion of UK pension assets

  Net-wealth definition adjustment

  Starting with the June 2025 edition, the report excludes pension assets from the UK net wealth-to-income ratio and real net-wealth growth to improve comparability with wealth indicators for other G10 countries.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Japanese consumer and macro assets

  Relatively positive

  Strengths

  Real-income growth around P90, base-wage growth near historical highs, continued improvement in real wages, and a high household net wealth-to-income ratio.

  Weaknesses

  Still exposed to global energy prices and the external demand environment.

  Comparison

  Japan ranks near the top of G10 consumer health and is more resilient than the US, UK, Canada, and Australia.

  Risks

  If energy subsidies or price controls are withdrawn, the real-income buffer could weaken.

• Eurozone consumption

  Neutral to slightly positive

  Strengths

  A tight labor market, a 6.3% unemployment rate near historical lows, and healthy balance sheets.

  Weaknesses

  Real-income growth around P40, with a more delayed pass-through of the energy shock to gas and electricity prices.

  Comparison

  Overall health is around P55, better than the US, UK, and Canada, but income pressure may emerge with a lag.

  Risks

  Further increases in gas and electricity prices could gradually pass through to consumer prices and reduce real incomes.

• US consumption

  Neutral to cautious

  Strengths

  Household balance sheets remain healthy, debt-service pressure is low by historical standards, and real consumption still grew in May.

  Weaknesses

  Real consumption growth has fallen to P15, real-income growth is below its historical average, and consumer confidence remains low.

  Comparison

  Overall consumer health is around P40, weaker than in Japan, the Eurozone, and Australia.

  Risks

  The report expects consumption growth to fall to 1.3% by year-end, while normalization of the savings rate may weaken spending resilience.

• UK consumption

  Cautious

  Strengths

  Real consumption growth improved to P65, and the net wealth-to-income ratio is around P55.

  Weaknesses

  The labor market is soft, consumer confidence is subdued, and real-income growth is around P35.

  Comparison

  Overall health is around P40, similar to the US but with a weaker labor market.

  Risks

  Further slowing wage growth and pressure from energy bills could constrain disposable income.

• Canadian consumption

  Cautious

  Strengths

  The net wealth-to-income ratio is around P90, and the overall consumer-health proxy improved from the previous dashboard.

  Weaknesses

  Consumer confidence is weak, real-income growth has deteriorated, unemployment is 6.6%, and debt-service pressure is elevated.

  Comparison

  Overall health is around P30, making Canada relatively weak among the major economies covered in the report.

  Risks

  High interest payments, weak house prices, and labor-market volatility could weigh on consumption.

• Australian consumption

  Neutral

  Strengths

  The labor market is near historical lows; the net wealth-to-income ratio and labor market are healthy by historical standards; and nominal spending rebounded in May.

  Weaknesses

  Real-income growth is around P15, while consumer confidence fell 2.9% month over month in June.

  Comparison

  Overall health is around P50, stronger than in the US, UK, and Canada but weaker than in Japan and the Eurozone.

  Risks

  Deteriorating household-finance expectations, declining house-price expectations, and debt-service pressure could weaken spending.

Key data

• Overall consumer healthJapan around P55, the Eurozone around P55, Australia around P50, the US and UK around P40, and Canada around P30P-values represent historical percentiles; higher values indicate healthier consumer conditions.
• Real consumption growth percentileJapan P80, the UK P65, Canada P50, the Eurozone P45, Australia P25, and the US P15Compared with the previous dashboard, Japan, the UK, Canada, the Eurozone, and Australia improved, while the US slowed.
• US consumption outlookYear-on-year consumption growth is expected to decline from 2.1% to 1.3% by year-endMainly due to real-income headwinds and normalization of the savings rate.
• US real personal consumption in May+0.3% month over monthReal services consumption rose 0.2%, while real goods consumption rose 0.5%.
• US savings rate3.0% in MayIt was broadly unchanged after declining for three consecutive months.
• Labor marketEurozone unemployment rate 6.3%, Japan 2.5%, Australia 4.4%, the US 4.3%, the UK three-month average 4.9%, and Canada 6.6%The Eurozone, Japan, and Australia remain near historical lows; the US is normalizing, while the UK and Canada are weak.
• US consumer confidenceThe University of Michigan Consumer Sentiment Index rose to 48.9 in June, versus 44.8 in MayThe report says moderation in gasoline prices early in the month provided some relief, with a more pronounced improvement among low-income consumers.
• Japan wages and incomeBase-wage growth of 3.4%, with real wages positive for the fourth consecutive monthGovernment price controls softened the energy shock, leaving Japan’s real-income growth around P90.
• Australian consumptionNominal household spending rose 1.3% month over month in MayThis reversed April’s 1.1% month-on-month decline, with broad-based growth, particularly in discretionary consumption.
• Debt and debt serviceUS debt-service ratio around P75, the Eurozone around P65, Japan around P50, Canada P20, Australia P35, and the UK P45Interest-payment pressure remains elevated in Canada and Australia, while housing-mortgage growth in Japan and Australia is above trend.

Impact & implications

For investment implications, the report supports a more cautious macro view on developed-market consumption: healthy balance sheets prevent a rapid deterioration in spending, but real incomes, energy prices, and subdued confidence limit further upside. Japan benefits relatively from wage growth and policy buffers, making its consumption more resilient; US consumption remains resilient in the short term but faces rising risks of slowing by year-end; labor-market and confidence pressures in Canada and the UK warrant closer attention.

Risks

• Rising energy prices continue to erode real incomes, with the pass-through potentially lagging in Europe.
• Low-income groups are more vulnerable in consumer confidence and real purchasing power because energy spending represents a larger share of their budgets.
• Normalization of the US savings rate could shift consumption from its current resilience toward slower growth.
• Weak labor markets in the UK and Canada could place further pressure on wages and consumer confidence.
• Higher interest payments in Canada and Australia are increasing household debt pressure.
• Falling house prices or deteriorating house-price expectations could weigh on consumption through the wealth effect.

What to watch

• The speed at which energy prices pass through to European consumer prices and real incomes in the second half of 2026.
• Whether US year-on-year consumption growth declines from 2.1% to 1.3% as forecast by the report.
• Whether the US savings rate remains near 3.0% or normalizes further.
• Whether Japanese base wages and real wages continue to improve.
• Whether unemployment, wage growth, and consumer confidence in Canada and the UK continue to weaken.
• Changes in Australian consumer confidence, household-finance expectations, and house-price expectations.
• Whether real income, consumption growth, and confidence deteriorate simultaneously in the G10 consumer-health indicators.