Goldman Sachs(US:GS)2025-12-24 02:32Summary of the 2026 Consumer Outlook Conference Call Industry Overview - The report focuses on the U.S. consumer spending outlook for 2026, highlighting the expected growth trends and underlying economic factors. Key Points and Arguments Consumer Spending Growth - Consumer spending grew at a strong 3.5% pace in Q3 2025 but is projected to moderate to 2.2% in 2026 on a Q4/Q4 basis, down from 3.4% in 2024 [2][5][30] - The slowdown is attributed to slower real income growth, with job gains slowing and tariff-related price increases keeping inflation elevated [2][5] - The new tax bill is expected to provide a +0.2 percentage point (pp) boost to household consumption growth in 2026, particularly in the first half of the year [10][18][21] Job Growth and Labor Income - Job growth is anticipated to rebound from 32,000 per month to 70,000 in 2026, driven by reduced tariff impacts and fiscal stimulus [11][14] - Real labor income growth is expected to rise to 2.3% in 2026, up from 1.9% in 2025, providing a solid foundation for consumption growth [11][22] Inflation and Wage Growth - Inflation is projected to decline more than wage growth, leading to slightly higher real wage growth of just over 1% [15][16] - The report estimates that tariff effects have boosted inflation by 0.5pp so far, with an additional 0.3pp expected over the next six months [15] K-Shaped Recovery - The consumer economy is expected to exhibit a K-shaped recovery, with lower-income households facing the most significant challenges due to government spending cuts and reduced immigration impacting job growth [33][35] - Higher-income households are likely to experience stronger spending growth, benefiting from wealth effects driven by rising equity prices [38] Risks to Consumer Spending - Two major risks to the spending outlook include: 1. A potential weak job market that could restrain income and spending growth, particularly affecting lower-income workers [47][48] 2. A significant decline in equity or asset prices, which could turn the wealth effect into a drag on spending, with estimates suggesting a 20% decline in equity prices could subtract 0.7pp from consumption growth [51][52] Overall Consumption Forecast - The forecast for consumption growth in 2026 is solid at 2.2%, exceeding the consensus forecast of 1.9%, with stronger growth expected in the first half of the year due to fiscal and wealth effects [30][32] Additional Important Insights - The report emphasizes the importance of the new fiscal legislation and its impact on disposable income and consumption growth [18][21] - It highlights the stabilization of delinquency rates in consumer loans, suggesting that rising delinquency rates may not pose a significant risk to spending [41][42] This summary encapsulates the critical insights from the conference call regarding the U.S. consumer spending outlook for 2026, focusing on growth expectations, underlying economic factors, and potential risks.