Spending Continues, but the Mood Has Shifted
U.S. consumers entered 2026 still spending, but with a noticeably different posture than in prior years. Retail sales remain positive, travel demand has not collapsed, and services spending continues to support headline growth.
Beneath the surface, however, confidence has weakened. Households are increasingly spending out of necessity rather than optimism, relying on borrowed money to maintain living standards amid rising costs.
Credit Cards and BNPL Fill the Gap
Credit usage has surged across multiple categories. Credit card balances continue climbing, while buy-now-pay-later services have expanded beyond discretionary purchases into essentials such as groceries, utilities, and insurance premiums.
This shift suggests that spending is being sustained by financial leverage rather than income growth. Consumers are smoothing consumption, but at the cost of higher future obligations.
Wage Growth Fails to Keep Pace With Costs
Nominal wages have risen modestly, but real purchasing power remains under pressure. Housing costs, healthcare expenses, and insurance premiums continue to absorb a larger share of household income.
For many workers, pay increases are no longer translating into improved financial security. Instead, higher earnings are offset by persistent cost-of-living pressures, leaving little room for savings or debt reduction.
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Auto Loans and Long-Term Debt Stretch Budgets
Auto financing has become another pressure point. Longer loan terms and higher interest rates have locked consumers into extended payment cycles, reducing flexibility in household budgets.
Delinquencies remain contained for now, but stress indicators are building. Consumers are prioritizing minimum payments rather than accelerating principal reduction, signaling caution rather than confidence.
Savings Buffers Continue to Erode
Excess savings accumulated during the pandemic have largely dissipated. Households that relied on those buffers to absorb inflation shocks are now operating with thinner margins.
Savings rates remain below historical averages, increasing vulnerability to unexpected expenses or employment disruptions. This erosion reduces resilience even if headline spending appears stable.
Why Spending Has Not Collapsed
Despite these pressures, consumer spending has not fallen sharply. Employment remains relatively strong, and many households continue to prioritize consumption, particularly in services and experiences.
Behaviorally, consumers appear reluctant to sharply cut back, choosing instead to finance continuity through credit. This dynamic delays adjustment but increases long-term fragility.
Policy Signals Lag Household Reality
Macroeconomic indicators often fail to capture household-level stress in real time. Rising credit use does not immediately register as economic weakness until defaults or layoffs emerge.
This lag creates a policy blind spot, where consumer vulnerability builds quietly before appearing in official data. By the time warning signs surface, adjustment becomes more abrupt.
What This Means for the 2026 Outlook
The U.S. consumer is not collapsing, but neither is it healthy. Spending is increasingly supported by leverage rather than confidence, income growth, or savings.
If borrowing costs remain elevated and wage growth fails to accelerate, households may eventually be forced to retrench. The risk is not a sudden stop, but a gradual erosion of consumer resilience that weighs on growth later in 2026.
