US consumer spending insights for strategic decision-makers

The key finding is not that the US consumer is weak, it's that consumer spending power varies significantly across households.

How will US consumer spending change in 2026? 

The US consumer entered 2026 in a position of relative strength compared to other G7 nations. The average household retains a meaningful discretionary income profile, driven by a soft landing in the labor market and real wages recovering beyond 2021 levels. 

But that strength is increasingly concentrated among a small group of affluent households. Baringa's Consumer Spending Model analyzes expenditure patterns from approximately 130 million US households. It projects that US consumer spending monthly YoY growth could fall from pre-crisis levels of 2.16% to 0.3% if energy, housing, and utility costs intensify. The national outlook remains positive, but the margin for error narrows quickly as cost pressures increase.

Who is actually driving US consumer spending? 

• Demand is concentrated at the top. The "High Income, Own Outright" segment is 8.1% of US households but 25.1% of total spend. These households earn over $200,000 annually and own their homes with no mortgage. 

• The other end looks very different. The "Solo & Low Income" segment is 10.9% of US households and 4.9% of total spend. 

• Income changes the scale of the basket, not its shape. Households across income groups spend across many of the same categories. Higher-income households simply have more headroom and spend more across the board. 

For retailers and consumer products companies, this means the national average is not a reliable planning tool. Demand can appear stable at the overall level while specific consumer segments, regions, and discretionary categories weaken. 

Why gasoline decides the outcome

Housing is the largest structural cost for US households. But gasoline is the cost that moves most, and it could rise by up to 40%. 

As fuel prices climb, gasoline accounts for the majority of the incremental rise in household costs across most consumer segments. Affordability weakens most for Solo & Low Income households, Low Income Couples, and Young Single Professionals, while more affluent households have more room to absorb it. 

Consequently, gasoline prices serve as a high-frequency leading indicator of mass-market discretionary demand. For retailers and consumer products leaders, gasoline prices can provide an early signal of changing discretionary demand, often moving faster than traditional consumer sentiment indicators. 

What gets cut first? 

When budgets tighten, households cut in a predictable order. 

• Discretionary categories absorb the pressure first. Restaurants, apparel, recreation, and vehicle purchases see the sharpest slowdown. 

• Essentials are protected. Households prioritize essential expenditure, and under greater pressure, growth across most categories approaches minimal levels. 

• Fixed costs squeeze the exposed hardest. Housing takes 52% of net income for renting "Solo & Low Income" households, against 6% for "High Income, Own Outright" households. Electricity and gas take 24% of net income for the same low-income group, against 2% for the most affluent. 

Frequently asked questions

Is the US consumer more resilient than other G7 economies in 2026? 

Yes. The US has outperformed every other G7 economy since 2007, averaging 2.0% annual real GDP growth, while a soft labor market landing continues to support household incomes. The US labor market has also achieved a soft landing, reducing vacancy rates without a significant rise in unemployment, supporting household incomes going into 2026. 

Has the US avoided a prolonged real-terms wage contraction? 

Yes. The post-pandemic inflation shock eroded real incomes, but the US and UK have now regained lost purchasing power, with real wages exceeding 2021 levels. In contrast, real wages remain below pre-inflation levels across the Eurozone, Australia, and Japan. 

Which US households are most exposed to rising costs in 2026? 

Affordability weakens most for "Solo & Low Income" households, "Low Income Couples", and "Young Single Professionals". For renting "Solo & Low Income" households, housing already consumes 52% of net income. Electricity and gas add a further 24%. These groups have the least room to absorb any further shock from rising gasoline or utility costs. 

Which spending categories are most at risk? 

Restaurants, apparel, entertainment, and vehicle purchases see the largest decline in growth as household budgets tighten, reflecting their higher sensitivity to cost pressure. Healthcare is the most resilient category. Groceries and alcohol remain relatively stable, though the model shows consumers trading between brands and price points rather than cutting the category altogether. 

Does geography change the picture significantly? 

Yes. Spending strength is concentrated in major metropolitan areas. Cities such as Los Angeles, Seattle, and Washington, D.C. show above-average spending levels. Smaller metro, micro, and non-metro areas tend to underperform, and those differences widen as downside risks increase.