G10 consumer balance sheets remain robust, but spending growth has begun to slow across most developed markets

Overview

The report updates the G10 consumer dashboard through July 2026 and incorporates some August confidence data. Its central conclusion is that household wealth and some labor markets remain healthy, but the energy-price shock is depressing real incomes and confidence among lower-income groups, while consumption growth has also weakened across most developed economies; among the economies covered, overall conditions are relatively stronger in Japan and Australia and relatively weaker in Canada.

Core views

The composite indicators show that consumer fundamentals remain supported, but momentum is beginning to weaken. Goldman Sachs calculates percentiles against each country's own historical distribution and reverses the percentiles for the unemployment gap and debt-service ratio so that a higher percentile consistently represents a more favorable outcome. Overall consumer health is approximately P65 in Japan, P55 in Australia, P50 in the Euro Area, P45 in the United States and United Kingdom, and P35 in Canada; however, the US chart title separately shows approximately P40. Compared with the previous edition, Australia and the United Kingdom improved, while Japan deteriorated. Household balance sheets remain the principal source of support. Net wealth-to-income ratios are near historical highs in Japan, Australia, and the United States, approximately P90 in Canada and the Euro Area, and approximately P60 in the United Kingdom. Year-over-year real net wealth growth stands at P90 in Japan, P55 in Australia and the United States, P35 in Canada, and P30 in the Euro Area and United Kingdom. In other words, the stock of wealth remains substantial in most economies, but recent real wealth growth varies markedly, with Japan the strongest and Europe and the United Kingdom relatively weak. Consumer confidence, however, is broadly subdued, and the erosion of purchasing power from rising energy prices is particularly pronounced among lower-income groups. The University of Michigan US consumer sentiment index fell to 51.0 in August from 55.2 in July, with the decline exceeding expectations; the survey organization noted that confidence fell especially sharply among older, lower-income, and non-college-educated consumers, who are more vulnerable to inflation-driven losses in purchasing power. Australia's confidence index improved for a second consecutive month in August, rising from 83.9 to 88.9. The improvement was concentrated among mortgage holders and respondents surveyed after the Reserve Bank of Australia's August 11 decision was announced, but the index remained 11% below its historical average. Real income performance is similarly divergent. US real income growth is at P10, partly reflecting volatility caused by policy changes and reduced immigration, which may overstate the extent of the slowdown; Canada is approximately P30 and the Euro Area approximately P40, with all three weighed down by rising energy prices. The United Kingdom is around its historical median at P50, Australia around P60, and Japan at P95. The report attributes the more favorable outcomes in Japan and Australia to government price-control measures that have limited the energy shock. Growth in basic wages for all workers in Japan accelerated from 3.0% yoy in May to 3.4% in June, while the same-sample measure closely monitored by the Bank of Japan rose from 2.5% to 2.9%; regular private-sector pay growth in the United Kingdom on a three-month year-over-year basis edged down from 2.9% in May to 2.8% in June. Spending growth has weakened across most markets. Compared with the previous edition, real spending growth fell to P60 in Japan, P55 in the Euro Area, and P35 in Canada; the United Kingdom remained at P60, while Australia improved to P65. US core retail sales fell 0.4% mom in July, significantly below expectations, although Amazon Prime Day was brought forward from its usual July timing to June this year, amplifying July's sequential weakness. After smoothing this timing distortion, Goldman Sachs estimates that annualized three-month US real core retail sales growth slowed to 1.1%. US second-quarter corporate results and management commentary indicate that unusually high tax refunds temporarily supported consumers; as this support fades, Goldman Sachs' US economics team expects real consumer spending growth to slow to a below-potential 1%—1.5% in the second half. Australian household spending rose 0.8% mom in June, above expectations, with discretionary spending increasing 1.2%. In addition, spending on goods and services remains subdued in the United Kingdom and Germany; savings rates remain elevated in Western Europe, Canada, and Australia, while the US savings rate continues to decline. Labor markets continue to support consumers in the Euro Area, Australia, and Japan, but the United Kingdom is relatively weak. Unemployment rates in the Euro Area, Japan, and Australia were 6.3%, 2.5%, and 4.5%, respectively, near their historical lows; the US unemployment rate was 4.1%, around P70, Canada's was 6.4%, around P50, and the United Kingdom's three-month moving-average unemployment rate was 4.9%, around P30. Since the previous edition, unemployment rates in the United States and Canada both fell by 0.1 percentage point, but the US decline resulted from a lower labor-force participation rate; rates in the United Kingdom and Australia each rose by 0.1 percentage point. Wage growth slowed in North America, rose modestly or moved sideways elsewhere, and negotiated wage growth in Europe also eased slightly. Debt-service and debt indicators continue to reflect regional differences. By historical standards, household debt-service ratios are at P75 in the United States and P65 in the Euro Area, indicating relatively low debt-service pressure; Japan and the United Kingdom are both around P45, near their historical averages; Canada is at P20 and Australia at P35, indicating relatively high pressure, and the report also notes that interest expenses remain elevated in both countries. Canadian house prices have shown signs of stabilizing after a sustained decline since 2022. Growth in outstanding household debt is above historical averages in Asia and Canada, and above trend in Japan and Australia; Western Europe is near its historical average, while the United States is at a historical low. Overall, strong wealth stocks and some tight labor markets can still cushion pressures on consumption, but weak real incomes, subdued confidence, and slowing spending indicate that this buffer has not translated into broadly strong consumption growth.

Analysis framework

Goldman Sachs first selects timely and as-comparable-as-possible indicators of spending, unemployment, confidence, real income, debt service, wealth growth, and net wealth-to-income ratios for each economy, then converts the indicators into percentiles within each country's own historical distribution. The report uses six-month moving averages for volatile monthly data, employs flash estimates, survey information, or regression-model nowcasts for data not yet released, and weights indicators according to frequency, timeliness, and volatility to construct an overall consumer health measure. It then uses the latest retail sales, wage, unemployment, confidence, and debt data to explain each country's ranking and changes in that ranking.

Methodology notes

• (method outside vocabulary)

  Weighted historical-percentile consumer health indicator

  For non-US economies, percentiles are calculated against each country's historical distribution since 2000; for the United States, the distribution since 1980 from its consumer dashboard is retained. Reverse percentiles are used for the unemployment gap and debt-service ratio so that higher values consistently represent better consumer conditions. Composite weights are 20% for real spending growth, 20% for the unemployment gap, 20% for consumer confidence, 15% for real income growth, 10% for the debt-service ratio, 10% for real net wealth growth, and 5% for the net wealth-to-income ratio.

• (method outside vocabulary)

  Six-month moving average

  The report uses six-month moving averages for monthly changes in real spending, real income, and similar indicators to reduce the impact of monthly data volatility and one-off factors on trend assessments.

• (method outside vocabulary)

  Regression nowcasting and flat-value assumption for missing periods

  When the latest quarterly wealth, debt-service ratio, or disposable-income data have not yet been released, the report builds regression models using high-frequency variables such as house prices and equity prices to generate nowcasts. If a July data point has neither been released nor estimated, the weighted average assumes it is unchanged relative to June; certain panels with data through June accordingly carry forward May values.

• (method outside vocabulary)

  Cross-country harmonization of spending measures

  The United States uses six-month real personal consumption expenditure growth; the Euro Area, United Kingdom, and Canada use month-over-month real retail sales growth; Australia uses a monthly nominal spending indicator adjusted for inflation and housing costs; and Japan uses the average of the real consumption activity index and real consumption trend, seeking to align the most timely data available for each country as closely as possible.

• (method outside vocabulary)

  Unemployment rate gap relative to OECD NAIRU

  The labor-market indicator uses the gap between the monthly unemployment rate and the OECD estimate of the non-accelerating inflation rate of unemployment; the Euro Area and United Kingdom also apply an hours-worked adjustment for the impact of pandemic-era furlough programs that suppressed reported unemployment rates.

• (method outside vocabulary)

  Consumer confidence survey harmonization and GDP weighting

  The report selects the principal survey indicator for each country; because Canada lacks nationwide data, it uses the Morning Consult index and backcasts its history using the US Michigan index, whose question wording is similar. The Euro Area Morning Consult composite index is calculated by GDP-weighting Germany, France, Italy, and Spain.

Key data

• Overall consumer healthJapan P65, Australia P55, Euro Area P50, United States and United Kingdom P45, Canada P35Summary value in the main text; the US chart title separately shows approximately P40
• US August consumer sentiment index51.055.2 in July, with the decline exceeding expectations
• Australia August consumer confidence index88.983.9 in July, but still 11% below the historical average
• US July core retail sales-0.4% momSignificantly below expectations, with Prime Day's shift forward to June amplifying July's weakness
• US annualized three-month real core retail sales growth+1.1%After smoothing the timing distortion from Prime Day
• Forecast for US real consumer spending growth in the second half1%—1.5%Goldman Sachs' US economics team expects growth to fall below potential as temporary support from tax refunds fades
• Australian household spending in June+0.8% momAbove expectations, with discretionary spending increasing 1.2%
• Japan basic wage growth in June+3.4% yoy3.0% in May; the same-sample measure rose from 2.5% to 2.9%
• UK private-sector regular pay growth in June+2.8% yoyOn a three-month year-over-year basis, versus 2.9% in May
• Unemployment rates in major economiesEuro Area 6.3%, Japan 2.5%, Australia 4.5%, United States 4.1%, Canada 6.4%, United Kingdom 4.9%The United Kingdom figure is a three-month moving average; the Euro Area, Japan, and Australia are near their respective historical lows
• Historical percentiles of household debt-service ratiosUnited States P75, Euro Area P65, Japan P45, United Kingdom P45, Canada P20, Australia P35Reverse percentiles are used, so a higher value represents lower debt-service pressure
• Net wealth-to-income ratioJapan, Australia, and the United States near historical highs; Canada and the Euro Area P90; United Kingdom P60Household balance sheets remain the principal support for consumer fundamentals

Impact & implications

The report's cross-country comparison indicates that G10 consumers are not broadly experiencing balance-sheet stress: household wealth is high, debt-service ratios are low in the United States and Euro Area, and labor markets are tight in the Euro Area, Japan, and Australia. However, energy prices are depressing confidence through the real-income and purchasing-power channels, with lower-income consumers particularly affected; as support from US tax refunds fades and real spending indicators decline across several economies, a divergence has emerged between robust stocks of wealth and consumption flows. Overall conditions are relatively stronger in Japan and Australia, while Canada simultaneously faces weaker confidence, deteriorating real income, and higher debt-service pressure.

Risks

• Persistently high energy prices could further erode real incomes and purchasing power, with lower-income consumers the most sensitive.
• After the temporary support from unusually high US tax refunds fades, real consumer spending growth could slow to 1%—1.5% in the second half.
• Interest expenses and debt-service pressure in Canada and Australia are higher than in other major economies and could constrain household spending capacity.