Goldman Sachs expects US discretionary cash inflow to improve in 2027, but sees continued pressure on the bottom income quintile.

Overview

Goldman Sachs updates its 2026 US consumer outlook and introduces a 2027 discretionary cash-flow framework. It expects a modest broad improvement next year as income growth accelerates, interest rates ease and essential spending moderates, but expects the lowest-income households to continue lagging.

Core views

Goldman Sachs has reduced its 2026 consumer cash-flow outlook as the macro backdrop has softened. It now forecasts aggregate disposable personal income (DPI) growth of 4.0%, 70 basis points below its April 2026 forecast of 4.7%. The reduction spans all income cohorts: roughly 50 basis points for the bottom quintile, around 60 basis points on average for the middle three quintiles, and 80 basis points for the top quintile. This leads to a 2026 pre-savings discretionary cash-flow (DCF) forecast of 3.0%, down from 3.7%. By quintile, Goldman Sachs now models 2026 pre-savings DCF growth of 0.5%, 2.8%, 4.4%, 4.3% and 2.5% from the bottom to the top quintile, respectively, versus prior forecasts of 0.8%, 3.6%, 5.0%, 4.9% and 3.3%. The report characterizes the near-term consumer environment as uneven. Its economists expect real spending growth to slow in the second half of 2026 and unemployment to reach 4.2% by year-end. Higher energy prices are expected to weigh particularly heavily on lower-income households because energy is a larger share of their budgets. The report also notes a stronger precautionary saving motive: the savings rate fell to 2.7% in June and is projected to rise to 3.5% by the end of 2026. Consumer credit growth has increased, but household leverage and debt-servicing costs remain low, household balance sheets are described as strong, and net worth relative to DPI remains near an all-time high. Consumer confidence measures, however, remain low. For 2027, Goldman Sachs expects real DPI growth to improve as inflation falls and January cost-of-living adjustments support income, partly offset by weak population and job growth. Aggregate DPI is forecast to grow 4.2%, up from 4.0% in 2026 and above the 3.6% annual average for 2009-19. Total household cash-flow growth is expected to rise to 3.9% from 3.7%. The transmission mechanism is an easing-rate environment: Goldman Sachs economists forecast two rate cuts, in June and December 2027, which the report expects to support mortgage-equity withdrawals of about $160 billion versus $146 billion in 2026 and borrowings of about $164 billion versus $144 billion. Financial obligations are projected to ease slightly to 14.6% of DPI from 14.7%. The other major support is a sharp moderation in essential-expense growth. Goldman Sachs models essential spending growth of 2.6% in 2027, down from 6.7% in 2026, led by energy-cost pressure shifting to -3.2% from +14.2%; food inflation expectations for the second half of 2027 are also somewhat lower. Together with firmer DPI growth, this produces a projected 4.2% increase in pre-savings discretionary cash inflow, up from 3.0% in 2026. This remains below the report's pre-Covid average pre-savings DCF growth of 5.1% for 2009-19. Income growth is expected to be broadly balanced across quintiles in 2027, at 4.2%, 4.4%, 4.2%, 4.3% and 4.2% from bottom to top. But the pass-through to pre-savings DCF remains less even because essential spending and financial obligations still take a relatively larger share of lower-income budgets. Goldman Sachs forecasts pre-savings DCF growth of 2.8%, 4.6%, 4.5%, 4.5% and 4.1% across the five quintiles. Thus the bottom quintile improves substantially from 0.5% in 2026 but still lags the 4.2% aggregate forecast. Finally, Goldman Sachs distinguishes pre-savings cash inflow from a savings-adjusted DCF measure that it uses as a proxy for personal consumption expenditures. Although pre-savings DCF improves, the report expects the savings rate to rise to 3.6% of DPI in 2027 from 3.4% in 2026. That higher saving assumption reduces forecast savings-adjusted DCF growth to 3.9% in 2027 from 4.5% in 2026. Based on this macro backdrop, the report identifies selected stocks across consumer-related sectors as best positioned for 2027.

Analysis framework

Goldman Sachs begins by revising its 2026 income and cash-flow forecasts using its economists' macro assumptions, then breaks the effects down by household income quintile. It builds the 2027 outlook by linking DPI, cash adjustments, borrowing, mortgage-equity withdrawals, financial obligations and essential expenses to pre-savings discretionary cash inflow. It then applies an assumed savings rate to derive savings-adjusted DCF, a proxy for consumer spending.

Methodology notes

• Corporate Fundamentals and Finance

  Household discretionary cash-flow model

  The report estimates consumer spending power by starting with DPI and household cash inflows, then deducting financial obligations and essential expenses. It separately adjusts for saving to derive a spending proxy.

• Industry AnalysisVolume-price decomposition

  Income and expense-driver decomposition

  The outlook decomposes changes in consumer cash flow into income growth, borrowing and mortgage-equity withdrawals, financial obligations, energy, food and healthcare spending, showing how each driver affects discretionary cash flow.

Asset mapping & comparison

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

• ORLY

  Identified as best positioned for 2027 in Hardlines/Broadlines.

  Strengths

  Macro positioning cited by Goldman Sachs.

  Comparison

  Grouped with ULTA, WMT and VVV.

• ULTA

  Identified as best positioned for 2027 in Hardlines/Broadlines.

  Strengths

  Macro positioning cited by Goldman Sachs.

  Comparison

  Grouped with ORLY, WMT and VVV.

• WMT

  Identified as best positioned for 2027 in Hardlines/Broadlines.

  Strengths

  Macro positioning cited by Goldman Sachs.

  Comparison

  Grouped with ORLY, ULTA and VVV.

• VVV

  Identified as best positioned for 2027 in Hardlines/Broadlines.

  Strengths

  Macro positioning cited by Goldman Sachs.

  Comparison

  Grouped with ORLY, ULTA and WMT.

• PM, MNST, EL

  Identified as best positioned for 2027 in Consumer Staples.

  Strengths

  Macro positioning cited by Goldman Sachs.

  Comparison

  Grouped Consumer Staples selections.

• KTB, TPR, AS, ROST, TJX

  Identified as best positioned for 2027 in Softlines & Apparel.

  Strengths

  Macro positioning cited by Goldman Sachs.

  Comparison

  Grouped Softlines & Apparel selections.

• ATZ, ANF, LTH

  Identified as Buy selections in Specialty & Apparel Retail.

  Strengths

  Explicit Buy designation in the report.

  Comparison

  Grouped Specialty & Apparel Retail selections.

• RCL, HLT, ARMK

  Identified as Buy selections in Gaming & Lodging.

  Strengths

  Explicit Buy designation in the report.

  Comparison

  Grouped Gaming & Lodging selections.

• SFM, KR, OFRM

  Identified as best positioned for 2027 in Packaged Food & Food Retail.

  Strengths

  Macro positioning cited by Goldman Sachs.

  Comparison

  Grouped Packaged Food & Food Retail selections.

Key data

• 2026 DPI growth forecast+4.0%Down 70 bps from Goldman Sachs' April 2026 forecast of +4.7%.
• 2026 pre-savings DCF growth forecast+3.0%Down from +3.7% previously.
• 2027 DPI growth forecast+4.2%Up from +4.0% in 2026 and above the 2009-19 average of 3.6%.
• 2027 total household cash-flow growth+3.9%Up from +3.7% in 2026.
• 2027 pre-savings DCF growth+4.2%Up from +3.0% in 2026, but below the 2009-19 average of +5.1%.
• 2027 savings-adjusted DCF growth+3.9%Down from +4.5% in 2026 because the savings rate is forecast to rise.
• 2027 savings rate3.6% of DPIVersus 3.4% in 2026.
• Bottom-quintile 2027 pre-savings DCF growth+2.8%Improves from +0.5% in 2026 but remains below the aggregate +4.2% forecast.
• 2027 essential expenditure growth+2.6%Down from +6.7% in 2026; energy-cost pressure is forecast at -3.2% versus +14.2%.

Impact & implications

The report expects the 2027 backdrop to provide more resilient spending power across income cohorts through low-to-mid-single-digit pre-savings DCF growth. However, it expects lower-income consumers to remain relatively constrained, while increased saving limits the translation of stronger pre-savings cash flow into spending.

Risks

• Higher energy prices could continue to weaken real household income, particularly for lower-income households.
• Soft job growth and an unemployment rate forecast to reach 4.2% by end-2026 could constrain consumer cash flow.
• Low consumer confidence and a stronger precautionary savings motive could restrain spending.
• Essential spending and financial obligations remain elevated relative to history for the bottom income quintile.

What to watch

• The pace of inflation moderation, particularly energy and food costs.
• Whether the anticipated June and December 2027 rate cuts occur and support borrowing and mortgage-equity withdrawals.
• Changes in employment, unemployment and real spending growth through late 2026.
• The savings rate and whether precautionary saving rises as forecast.
• Income-quintile cash-flow trends, especially the bottom quintile's essential-expense burden.