Dive Brief:
- Real consumer spending growth is expected to decline to about 1.5% in 2026, though it will remain the backbone of the U.S. economy, according to a Tuesday report from Moody’s Ratings. More cautious consumer behavior and the impact of affordability concerns will leave the retail and consumer durable industries the most vulnerable.
- A softening labor market with cooling wage gains is among the key pressures “eroding households' consumption growth,” which could result in a more measured spending pace in the next year.
- Companies with multitiered price structures and those best aligned with consumer value and convenience are more likely to have better financial outcomes, per Moody’s analysts.
Dive Insight:
A sharp deterioration in consumer fundamentals is not on the table in 2026 as long as unemployment remains stable. Still, consumer sentiment has dropped and shoppers are especially hungry for value.
“Value-focused retailers are poised to gain market share as consumers trade down,” Moody’s analysts said. They also noted that households “can lean on liquid assets, wealth gains, credit, and expected fiscal policy support in the new year.”
Discount retailers, such as Dollar General and Dollar Tree, have already reported an increase in higher-income shoppers throughout 2025. Additionally, Dollar Tree has embarked on a long-term multiprice strategy to expand its offerings.
Data from Deloitte in October found that shoppers across income brackets and generations planned to curtail some of their holiday spending this season.
The latest report from Moody’s notes that younger job seekers are struggling to find employment while the core drivers of spend, middle-aged workers, are facing fairly low unemployment risk, helping to keep spend healthy.
Healthcare costs, such as increased deductibles and copays, are another drain on household finances, according to Moody’s. The pressures are even greater for consumers without any health insurance coverage, increasing the risk of depleted savings and borrowing needs.
High child care prices and the rising cost of other essentials — such as utilities and property taxes — also pose a risk to consumer spending budgets. All of this is compounded by a demonstrated drop in consumer sentiment, which Moody’s analysts say is partly driven by continued inflation and political uncertainty.
