Consumer spending, a key driver of the U.S. economy, is forecast to moderate in 2026, according to a recent report from Moody’s Ratings.
While household consumption will remain central to economic activity, real spending growth is projected to fall to about 1.5% next year, reflecting a more cautious spending environment compared with recent years.
Labor Market and Affordability Pressures
Moody’s analysts point to a softening labor market and cooling wage gains as factors tempering consumer demand. Slower income growth, combined with ongoing cost pressures on essentials such as healthcare and utilities, may constrain households’ discretionary spending in 2026.
Consumer sentiment has also weakened amid inflation concerns and broader economic uncertainty.
Retail Sector Implications
Industries that rely heavily on discretionary spending—such as consumer durables and nonessential retail—could face heightened vulnerability if spending growth continues to slow.
Retailers with multitiered pricing structures and a focus on value and convenience are expected to perform better as consumers seek to stretch their budgets.
Broader Outlook
Forecasts from other research suggest that slower spending may be part of a wider trend tied to demographic shifts, labor market dynamics, and economic headwinds. Nevertheless, consumer spending is still anticipated to be a key economic pillar, even as growth moderates.
