Goldman's State Of U.S. Consumer Outlook Gets More Grim
Goldman consumer analysts Kate McShane and Bonnie Herzog cut their 2026 discretionary cash-inflow growth forecast for the second time this year, citing a worsening squeeze on U.S. households as slower disposable income growth collides with higher fuel prices at the pump. The revision points to a softening among cash-strapped consumers as the US-Iran conflict enters its third month.
McShane and Herzog cut their 2026 U.S. discretionary cash inflow growth to 3.7% from the previous forecast of 4.2% in early April, as slower disposable income growth and the national average gasoline price over $4 per gallon squeeze household spending power.
Their revision reflects a lower forecast for disposable personal income growth of 4.7%, down from 5.0%, as tax cut benefits from President Trump's OBBBA are now seen largely offsetting higher capital gains tax payments, leaving the overall tax bill roughly unchanged from last year.
The largest drag on consumers is energy, as Goldman analysts at the start of the week raised their fourth-quarter 2026 Brent forecast to $90 a barrel from $80, citing ongoing disruptions in Persian Gulf production, a delayed normalization of Gulf exports to late June, and a slower recovery timeline for output.
"Accordingly, we now expect energy spending to grow by 14.4% in 2026 (vs. 12.3% prior) to reflect higher energy futures," the analysts said.
They warned that $100 Brent will create a 50-basis-point headwind to aggregate U.S. discretionary spending power in 2026, with working-poor households taking the brunt of the hit, at about 135 bps.
Here's their current view on the consumer for 2026:
Our economists expect a total tax benefit of around $75-90bn from the OBBBA but roughly unchanged tax bill y/y, resulting in a limited tailwind for consumer spending. Based on our economists' forecasts, we now expect +4.7% DPI growth in 2026 (vs. +5.0% when we last updated in early April), following +4.4% DPI growth in 2025, which is ahead of historical levels (i.e., 2009-2019 average annual growth of 4.0%).
We expect this to translate into a lower net household cash inflow of +4.2% in 2026 (vs. 4.6% prior from our early April analysis), representing a slight improvement over the +4.1% growth in 2025. Elevated interest rates were a meaningful burden on the US consumer over the past few years and our economists continue expect two 25bps rate cuts in 2026. Accordingly, we model 7.8% growth in mortgage equity withdrawals (MEW) and 7.7% growth in borrowings for 2026. We continue to anticipate modest relief from a slightly more favorable interest rate environment; our forecast for financial obligations remains unchanged at +14.3% of DPI in 2026, compared to +14.5% in 2025.
We model essential expenditures to grow by +7.4% in 2026 (unchanged), well above the +4.3% growth seen in 2025. This is predicated on +14.4% growth in spending on energy goods and services (vs. +12.3% prior) and +5.3% growth in food spending (vs. +6.6% prior), both up from +1.1% and +3.7% growth, respectively, in 2025. We raise our energy goods and services spending expectation to reflect higher energy futures, while we slightly temper our food inflation expectation due to lower than expected Feb data. This, coupled with our lower DPI growth assumption, translates into +3.7% discretionary cash inflow growth in 2026 (vs. +4.2% prior), representing a marginal sequential decline compared to +4.0% growth in 2025.
By income quintile, higher gasoline prices will disproportionately burden the bottom-income quintile, who spend roughly four times as much on gasoline as a share of after-tax income compared to the top quintile. We expect the bottom-income quintile to lag the aggregate US household with +4.2% DPI growth in 2026 (vs. +4.7% aggregate) as our economists continue to expect tepid job growth. Cuts to Medicaid and SNAP benefits, and now greater exposure to the increase in gasoline prices are cost headwinds to this income cohort. Our pre-savings DCF expectations for the bottom quintile remain unchanged at +0.8% for 2026, well below the +3.7% aggregate growth rate. Overall, pre-savings DCF expectations for 2026 have moved lower by 30-40bps across all other quintiles due to the lower expected DPI growth.
Our adjusted discretionary cash flow growth takes consumers estimated savings rate into account. Consistent with historical patterns where consumers dissave to cover higher energy costs, we now expect the savings rate to be lower than previously estimated in 2026, now at 4.3% of DPI (vs. 4.5% prior), below 2025 savings levels of 4.6% of DPI. Ultimately, a nearly 40bps lower discretionary cash inflow for 2026 relative to our prior forecast is balanced by a lower savings rate to drive adjusted DCF growth (a proxy for PCE growth) of +4.2% in 2026 (unchanged), though still below the +5.1% growth seen in 2025.
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"Given the continued volatility in oil prices, we present a hypothetical sensitivity analysis to estimate the impact on adj. discretionary cash flow for every 10%, 15%, and 20% increase in energy goods and services spending relative to our current modeled assumptions. Additionally, we believe higher energy prices would impact consumer spending power, and we see an over ~50bps headwind for consumer discretionary spending power for US households in aggregate in 2026, and ~135bps headwind for the bottom-quintile, assuming ~$100/bbl pricing holds," the analysts said.
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What could change Goldman's consumer outlook is a U.S.-Iran peace deal. But the UAE's exit from OPEC adds another downside risk for crude: the cartel's ability to defend prices is weakened just as any ceasefire and normalization of Hormuz traffic could send Brent and WTI prices cratering.
Professional subscribers can read Goldman's full "State of the US Consumer" note here at our new Marketdesk.ai portal