Despite widespread economic pessimism in 2025, US consumers entered 2026 on firmer footing than the headlines suggest.
On an annual basis, US Real Personal Income climbed to new record highs and consumer spending on goods generally accelerated. The takeaway for businesses is not just that growth is returning, but that it is uneven. Since consumer behavior varies widely by income, geography, and spending priorities, making broad assumptions is becoming increasingly risky.
Aggregate consumer balance sheets improved through 2025, with income growth supporting modest increases in spending and savings. While savings rates remain low, they are not signaling immediate stress. General ascent in the ITR Retail Sales Leading Indicator™ suggests that a mild pickup in consumer spending is probable in 2026.
The economy continues to exhibit K-shaped characteristics. Lower-income consumers tend to spend most incremental income, and higher-income consumers are more likely to save even though they account for a larger share of total spending. This dynamic matters for demand forecasting. Growth may appear muted at the aggregate level while still presenting meaningful opportunity within specific consumer segments.
Housing remains the largest expense across all income levels, and it continues to influence affordability and spending decisions. Rent growth has slowed, but prior increases still weigh on many households.
Inflation exposure and housing affordability also vary significantly by location. Population growth, income trends, and regional cost structures can materially affect consumer demand, especially for geographically concentrated businesses.
Leading indicators and consumer fundamentals point to moderate cyclical growth in 2026, a softer environment in 2027, and improving conditions once again in 2028. Businesses that can align pricing, inventory, hiring, and investment decisions with both consumer profiles and the broader business cycle will be better positioned to manage risk and capture opportunity.
The next phase of retail growth will not be driven by a single consumer story. It will be shaped by who consumers are, where they live, and how economic conditions affect their spending choices.