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US Consumers More Resilient Than Feared, Says Goldman
24 Apr
Summary
- Goldman's chief U.S. economist disputes widespread 'K-shaped' economy fears.
- Immigration policy, not income disparity, may explain weak spending.
- Housing affordability challenges continue to impact consumer spending.
Goldman Sachs' chief U.S. economist, David Mericle, has indicated that fears of a pronounced 'K-shaped' economy, characterized by diverging fortunes between high and low-income households, might be exaggerated. Mericle's team noted in December that consumer inflation and real income changes have been relatively consistent across income levels over the past year.
The economists suggest that weaker spending observed at stores catering to low-income households is likely attributable to shifts in immigration policy rather than a significant worsening of conditions for these households compared to the average. This perspective contrasts with other analyses that highlight growing disparities.
However, challenges in housing affordability are expected to become a more significant factor by late 2026. High shelter inflation, driven by a shortage of housing stock, forces many into the rental market, making homeownership increasingly unattainable for a substantial portion of the population.
Looking ahead, Goldman economists anticipate weak consumption growth in the coming months, potentially leading to a 1% decline in headline retail sales. They project continued underperformance for the lowest income quintile due to tepid job growth, benefit cuts, and increased gasoline prices, while middle and higher-income groups are expected to see firmer income growth.
