US consumer confidence remains low, while income and energy price pressures drag on consumption in 2H 2026

Overview

This report assesses the condition of the US consumer in May 2026 through Goldman Sachs' US Consumer Dashboard. The core conclusion is that consumer spending and household balance sheets remain resilient, but real income growth is clearly weak, consumer confidence is low, and energy prices and inflation pressures may weigh on consumption growth in the second half of 2026. The report also notes that the labor market is temporarily stable, but the growth drag from the Iran war is expected to slow job growth and push the unemployment rate up to 4.6% by end-2026.

Core views

First, current consumption resilience is partly supported by temporary OBBBA-related tax cuts and refunds and should not be viewed as a sustainable acceleration. Second, income is the main weak spot, with lower-income households facing greater real cash-flow pressure because food and energy account for a larger share of their spending. Third, household balance sheets remain strong, with net worth relative to disposable income near historical highs, but the saving rate is low and could rise as precautionary saving motives strengthen. Fourth, overall debt levels and debt-service costs remain at historically low levels, but 90+ day delinquency rates on credit cards and subprime auto loans remain elevated. Fifth, consumer confidence has weakened significantly, with the UMich index at a record low, signaling downside risk to willingness to spend.

Analysis framework

The report uses the US Consumer Dashboard framework to track consumer fundamentals across six dimensions: consumer spending, employment, income, wealth, debt, and consumer confidence, and forms a holistic judgment by combining indicators such as real PCE, retail sales, job growth, unemployment, real disposable income, household net worth, saving rate, consumer credit, delinquency rates, and the UMich and Conference Board confidence indices.

Methodology notes

• Macro consumption monitoringUS Consumer Dashboard

  Six-dimensional consumer health assessment

  This framework breaks down the condition of the US consumer into six dimensions—consumer spending, employment, income, wealth, debt, and confidence—to assess the resilience, vulnerabilities, and future direction of consumption growth.

• Historical range heatmapRed-green shading comparison since 1980

  Historical percentile comparison

  The report notes that the heatmap shading represents observations from most negative to most positive since 1980; consumption uses a 6-month moving average of real spending growth, employment uses the unemployment gap relative to NAIRU, income uses a 6-month moving average of real income growth, wealth uses the ratio of household net worth to disposable income, debt uses the household debt service ratio, and confidence uses the average of standardized UMich and Conference Board measures.

Asset mapping & comparison

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

• US macro growth

  Consumer spending is an important driver of US economic growth, and the report's consumption forecast directly affects the assessment of growth momentum in 2H 2026.

  Strengths

  Real PCE and April retail sales still show consumption resilience, and household balance sheets remain strong.

  Weaknesses

  Real income growth is weak, while energy prices and inflation pressures are eroding purchasing power, and consumer confidence remains low.

  Comparison

  Goldman Sachs forecasts 2026 real PCE growth at 1.5%, below the 1.7% market consensus.

  Risks

  Higher energy prices, a further slowdown in job growth, larger-than-expected AI-related job losses, or a continued decline in consumer confidence could all intensify downside growth pressure.

• US consumer-related equities and retail demand

  A slowdown in consumer spending could affect retail, discretionary consumption, and internet retail demand oriented toward household spending.

  Strengths

  Near-term retail sales data are strong, and OBBBA-related tax support has underpinned recent spending.

  Weaknesses

  The tax boost may be unsustainable, and lower-income households are more affected because food and energy make up a larger share of spending.

  Comparison

  Compared with currently strong retail sales, the report is more cautious on spending trends in the second half of 2026.

  Risks

  Weakening real cash flow, a rising saving rate, and falling confidence could weigh on discretionary spending.

• US consumer credit

  Consumers may smooth energy price shocks by increasing credit usage, making credit growth and delinquency rates important stress indicators.

  Strengths

  Household leverage and debt-service costs remain low relative to historical levels.

  Weaknesses

  90+ day delinquency rates on credit cards and subprime auto loans remain relatively high versus history.

  Comparison

  Overall debt levels are moderate, but some higher-risk credit categories are already showing stress.

  Risks

  If income and employment continue to weaken, delinquency rates could rise further and weigh on consumer credit quality.

• US household balance sheets

  Household wealth and saving behavior determine the ability to buffer consumption.

  Strengths

  The ratio of household net worth to disposable personal income is near historical highs, and the recent rebound in equity valuations has further supported net worth.

  Weaknesses

  The saving rate fell to 3.6% in March, and lower-income households have more fragile cash flow.

  Comparison

  The wealth side is stronger than the income side and is the relatively positive dimension in the report.

  Risks

  If equity markets correct or income remains weak, the wealth effect supporting consumption could diminish.

Key data

• Real PCE growth2.1% year over year as of MarchShows consumer spending is still maintaining a healthy growth pace.
• April retail salesHeadline retail sales +0.5%, core retail sales +0.5%Both nominal and real measures were strong, and March data were revised upward.
• 2026 real PCE forecastQ4/Q4 growth of 1.5%Below the 1.7% market consensus; the report expects consumption growth in 2H 2026 to come in below consensus.
• April job growth+115kThe report notes the revised figure was +48k, and estimated underlying job growth was about +51k, close to break-even.
• Unemployment rate4.3%The report says the unemployment rate has been moving sideways and expects it to rise to 4.6% by end-2026.
• Employment forecast for the remainder of 202638k/monthGoldman Sachs expects growth drag from the Iran war to modestly slow job growth.
• Real disposable income growth0.4% year over year in March, 0.2% on a 6-month annualized basisIncome growth is very weak, slowing by 0.8 percentage points and 0.3 percentage points, respectively, from prior levels.
• Tax-season boost from OBBBA to household incomeAbout $140 billionDriven by larger refunds and lower tax payments, though the report views this boost as temporary.
• 2026 real income forecastQ4/Q4 growth of 1.3%Real income growth for the lowest income quintile is expected to be only 0.5%.
• Saving rate3.6% in March; expected at 3.9% by end-2026 and 4.3% by end-2027The report expects stronger precautionary saving motives to push the saving rate higher.
• Consumer credit growth2.6% year over year in March, 2.7% on a 6-month annualized basisMay reflect consumers increasing credit usage to smooth the shock from energy prices.
• Home equity loan growth+1.4% 12-week annualized average as of May 13Growth has slowed significantly.
• UMich consumer sentiment44.8, down 5.0 pointsThe report says this is the lowest level on record.
• Conference Board consumer confidence93.1, down 0.7 pointsTogether with higher-frequency Morning Consult and the GS Social Media Economic Sentiment Index, it points to a recent pullback in consumer confidence.

Impact & implications

The report has a cautious implication for the US consumption and growth outlook: near-term consumption resilience remains, but if energy prices and inflation continue to erode real income, consumption growth in the second half of 2026 could slow further. For markets, consumer-related sectors and credit assets should watch cash-flow pressure on lower-income groups, weakening consumer confidence, and elevated credit card and subprime auto loan delinquencies as sources of demand and credit risk; at the same time, strong household balance sheets and low overall debt-service costs still provide some buffer for consumption.

Risks

• Rising energy prices further erode household purchasing power, especially for lower-income households.
• Inflation pressure causes consumer spending growth to slow in the second half of 2026.
• Growth headwinds from the Iran war could slow job growth and push up the unemployment rate.
• If AI-related job losses are larger than expected, the labor market could weaken more noticeably.
• If consumer confidence continues to fall after hitting a low, it could suppress willingness to spend.
• Elevated delinquency rates on credit cards and subprime auto loans suggest credit stress already exists in parts of the household sector.
• Timing mismatches in OBBBA-related tax support may mask underlying cash-flow pressure.

What to watch

• Whether real PCE and retail sales continue to show resilience.
• The impact of energy prices and inflation on real income and lower-income household cash flow.
• Monthly nonfarm payroll growth, underlying job growth momentum, and changes in the unemployment rate.
• Real disposable income in 2H 2026 and cash-flow performance after adjusting for OBBBA timing effects.
• Whether confidence indicators such as UMich, Conference Board, Morning Consult, and the GS Social Media Economic Sentiment Index continue to deteriorate.
• Whether 90+ day delinquency rates on credit cards and subprime auto loans continue to rise.
• Whether the saving rate rises as expected, and whether that implies a lower propensity to consume.