Here are the latest insights from Goldman Sachs Research on the financial health of the US consumer today.
July saw stronger retail sales, but the underlying spending growth trend remains weak. Goldman Sachs Research expects real spending growth to remain soft in the second half of 2025, as higher inflation erodes real consumer spending power.
Let’s take a closer look at Goldman Sachs Research’s analysis.
The core PCE index increased 0.27% month over month, and the year-over-year rate rose to 2.88%.
Core goods prices were flat in July, while core services prices rose 0.36%. Market-based core PCE increased 0.17%, and core services, excluding housing, rose 0.39%,
Headline prices increased 0.20% month over month, and the year-over-year rate ticked up to 2.60%.
Real personal spending increased 0.3% in July, reflecting a 0.9% increase in real goods spending and a 0.1% increase in real services spending.
Goldman Sachs Research expects real spending growth to remain soft in the second half of 2025 and forecasts only 1.0% real consumer spending growth in 2025 on a Q4/Q4 basis.
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Personal income increased by 0.4% in July, in line with expectations. Employment compensation rose 0.6%, proprietors’ income rose 0.7%, rental income rose 0.5%, and asset income rose 0.1%, while transfer receipts were flat.
Goldman Sachs Research expects higher inflation and slower job growth to weigh on real income in the second half of 2025, forecasting only 1.5% real income growth in 2025 on a Q4/Q4 basis (vs. 2.3% in 2024), with underperformance among the bottom and top income quintiles.
Our economists expect income growth to pick up next year on the back of a pickup in job growth and a fading inflation impulse from tariffs.
Goldman Sachs Research forecasts 2.1% real income growth in 2026 on a Q4/Q4 basis, but cuts to Medicaid and SNAP benefits will likely weigh on real income growth for lower-income households.
Household balance sheets are still strong, and the net worth-to-disposable personal income ratio remains elevated. That said, net worth growth slowed to 3.8% year over year in the first quarter of 2025 (vs. 9.1% in Q4 of 2024), with wealth accumulation slowing across all income and wealth groups.
The saving rate was unchanged at a downwardly revised 4.4% (vs. 4.5% in June). Goldman Sachs Research forecasts that the rate will remain at 4.5% through end-2025 before rising back to 4.8% by end-2026.
Consumer credit growth remained soft in June, increasing 2.1% year over year, although home equity loans continue to grow at a healthy pace.
Household leverage and debt servicing costs remain low by historical standards, and households are still not utilizing their excess borrowing capacity to grow spending.
Credit card delinquency rates continued to level off through the second quarter of 2025, with new seriously delinquent and new delinquent credit card balances edging down, although 90-day delinquencies remain elevated.
Prime auto loan delinquencies moved sideways in July, but subprime auto delinquencies ticked up and remained elevated.
The University of Michigan’s Consumer Sentiment Index saw a decline in its final August report, coming in at 58.2 (vs. 61.7 in July). The drop in sentiment was seen across groups by age, income, and stock wealth. The report also noted that “perceptions of many aspects of the economy slipped.”
The Conference Board Consumer Confidence Index saw a slight drop as well, falling by 1.3 points in August to 97.4.
According to the report, “consumers’ write-in responses showed that references to tariffs increased somewhat and continued to be associated with concerns about higher prices. Meanwhile, references to high prices and inflation, including food and groceries, rose again in August.”
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