Goldman Sachs warns of a slowdown in consumer spending as the boost from tax refunds fades

Goldman Sachs warns that U.S. consumer spending will slow down in the second half of 2026, following a temporary boost from tax refunds. The bank expects real spending growth to fall to 1-1.5% and raises doubts about the resilience of consumption, with implications for retailers and markets.

U.S. consumers have shown remarkable resilience so far in 2026, enduring high prices for gasoline and food, but Goldman Sachs warns that this strength may be reaching its limit. The investment bank published a note this week anticipating a slowdown in consumer spending for the second half of the year, as the temporary impact of tax refunds fades and real household cash flow stagnates.

Goldman Sachs' chief economist, Jan Hatzius, explained that sales among consumer-oriented companies grew at a healthy pace during the second quarter, but that dynamism was largely fueled by larger-than-expected tax refunds. In particular, second-quarter sales in S&P 500 discretionary consumer companies rose 5.9% year-on-year for the median, while sales of consumer staples increased by 3.9%. This strength was widespread: same-store sales, a key indicator for retailers, accelerated for companies serving both low- and high-income consumers.

The end of the refund effect and the revised trajectory

Despite the positive data from the second quarter, Hatzius wrote in the note that "we expect slow growth in consumer spending going forward." The economist acknowledged that the decline in retail sales in July was partly due to the negative impact of an earlier-than-usual Amazon Prime Day, but noted that the revised sequential trajectory now seems much more consistent with the bank's view that the strength of real spending in the spring was a temporary byproduct of increased tax refunds.

Goldman Sachs projects that real consumer spending growth will slow to a range of 1-1.5% in the second half of the year, in contrast to the faster pace observed in previous months. The forecast is based on the idea that real household cash flow is stagnating, which will limit consumers' spending capacity. This warning comes at a time when the U.S. economy expanded at an annualized rate of 2.4% in the second quarter, according to GDP, although the bank anticipates a slower pace in the coming months.

Goldman’s analysis is relevant because consumption accounts for about two-thirds of economic activity in the United States, and any slowdown in household spending would have direct implications for overall growth. Recent data already showed signs of exhaustion: consumers have accumulated credit card debt and have reduced their savings, suggesting that the ability to prop up consumption through borrowing also has limits.

The litmus test: retailers and Walmart as a key indicator

Goldman’s thesis on the slowdown in spending will be put to the test this week with the results and outlooks from Home Depot, Lowe's, Walmart, and Target, four retail giants that provide a window into the actual behavior of U.S. consumers. Of all the companies, Walmart should be the main focus, particularly given its forecasts for the third quarter, as its customer base includes both low-income consumers and those seeking value in times of inflation.

Deutsche Bank analyst Krisztina Katai also warned about the environment for retailers: "The incremental increase in sales may be difficult to generate in a context of cautious consumption and greater competitive pressures." This caution aligns with Goldman’s view, which sees a more rational and less impulsive consumer, potentially translating into more moderate retail sales growth in the coming quarters.

The combination of persistent inflation in food and energy, along with the waning effect of tax refunds, presents a mixed scenario for the second half of 2026. While second-quarter data showed robust consumption, Goldman economists suggest that this strength was a temporary mirage, and that the slowdown could be more pronounced than markets anticipate.

Implications for Markets and Retail

Goldman’s warning comes at a time when financial markets have shown optimism, but economic data is beginning to reveal cracks. The second-quarter GDP report showed a growth of 2.4%, a decent figure, but already reflecting a moderation compared to the first quarter. If consumption, which represents the largest part of GDP, indeed slows down as Goldman anticipates, third-quarter growth could be considerably weaker.

For retailers, the key lies in how they adapt to a more selective consumer. Walmart, with its focus on low prices and efficiency, may fare better than others, but even its executives will have to manage expectations in a cooler spending environment. Monitoring data such as same-store sales and forecasts from retail chains will be crucial in the coming months to confirm whether Goldman’s thesis materializes.

In summary, Goldman Sachs has issued a clear warning: the boost that tax refunds gave to U.S. consumption is fading, and the second half of the year will be more challenging. The question is whether the consumer will be able to maintain the pace or if the slowdown will be deeper than expected. The answer could define the course of the economy and markets in the coming months.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.