Here are the latest insights from Goldman Sachs Research on the financial health of the US consumer today.
August retail sales showed resilient spending. Goldman Sachs Research expects real spending growth to soften through year-end as higher inflation erodes real consumer spending power and forecasts only 1.2% real spending growth in 2025 on a Q4/Q4 basis.
Let’s take a closer look at Goldman Sachs Research’s analysis.
The August core PCE index increased 0.23% month over month, and the year-over-year rate rose to 2.91%.
Core goods prices fell 0.11% in August, while core services prices rose 0.34%. Core services excluding housing rose 0.33%, while market-based core PCE increased 0.15%.
Headline prices rose 0.26% month over month and 2.74% year over year.
Consumer spending rose 0.6% in August, above expectations. Real personal spending increased 0.3%, reflecting a 0.7% increase in real goods spending and a 0.2% increase in real services spending.
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Personal income increased by 0.4% in August, somewhat above consensus expectations. Employee compensation rose 0.3%, proprietors’ income rose 0.9%—mostly reflecting a $16 billion increase in farm income.
Rental income rose 0.4%, asset receipts rose 0.1%, and transfer receipts rose 0.6%, partially reflecting a 12.7% increase in net transfer receipts from businesses, which mostly captures insurance payouts.
Goldman Sachs Research continues to expect higher inflation and slower job growth to weigh on real income through year-end and forecast 1.7% real income growth in 2025 on a Q4/Q4 basis (vs. 2.3% in 2024).
Our economists expect income growth will pick up next year on the back of a pickup in job growth, new tax cuts, and a fading inflation headwind from tariffs.
Goldman Sachs Research forecasts 2.1% real income growth in 2026 on a Q4/Q4 basis, although cuts to Medicaid and SNAP benefits will likely disproportionately weigh on real income growth for lower-income households.
Household balance sheets are strong, and the net worth-to-disposable personal income ratio has risen back to near its all-time high following strong equity price gains. Net worth growth rose to 6.1% year over year in the second quarter of 2025 (vs. 3.8% in 2025 Q1), with larger gains among higher net-worth and income households.
The saving rate dropped 0.2 percentage point (pp) to 4.6% from an upwardly-revised July level (+0.4pp to 4.8%).
Consumer credit growth remained soft in July (+2.2% year over year), although home equity loans continue to grow at a healthy pace (+7.1%, 12-week annualized average).
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 August, while subprime auto delinquencies ticked down but remain fairly elevated.
The University of Michigan’s Consumer Sentiment Index saw a slight decline in its final September report, coming in at 55.1 (vs. 58.2 in August). The report noted: “Consumers continue to express frustration over the persistence of high prices, with 44% spontaneously mentioning that high prices are eroding their personal finances, the highest reading in a year. Interviews this month highlight the fact that consumers feel pressure both from the prospect of higher inflation as well as the risk of weaker labor markets.”
The Conference Board Consumer Confidence Index fell by 3.6 points from its August reading to 94.2 in September. The Conference Board noted that “consumer confidence weakened in September, declining to the lowest level since April.”
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