Federal Reserve Echoes Consumer Sentiment In McKinsey Data

Federal Reserve Chairman Kevin Warsh in Jackson Hole, Wyoming, on Friday suggested the central bank may not be done fighting inflation, but despite consumers feeling wary about the economy,many plan to spend the same or more on holiday shopping compared to last year.

McKinsey & Company’s ConsumerWise survey, released this week, shows how holiday budgets and spendingplans align with Chairman Warsh’s Friday remarks at the Jackson Hole Symposium, underscoring how persistent inflation continues to shape consumer behavior.

Chairman Warsh indicated thatfinancial conditions remain restrictive and suggested that further rate hikes may be possible. McKinsey’s consumer data reflected a similar tension: shoppers are cutting discretionary spendingwhile still showing resilience.

McKinsey’s nationwide sample of more than 4,000 U.S. consumers surveyed between July 29 and August 5, 2026 shows spending behavior across 22 categoriesusing a net spending intent metric.

Net spending intent is not a measure of total cash spent, but rather measures the balance of consumer sentiment. It is calculated by taking the percentageof people who plan to spend more and subtracting the percentage of people who plan to spend less.

For example, an apparel score of –24 means the group of shoppers cutting back onclothing is 24 percentage points greater than the group planning to buy more.

A score close to zero like last year’s –1 indicates a balanced market where spending is holding steady,while a deep negative score signals a widespread consumer pullback.

During the third quarter of 2026, one in four U.S. consumers reported feeling pessimistic about economic conditions, andthis remained steady with no change from the May 2026 quarter.

Some 41% of consumers reported mixed feelings while 34% reported being optimistic, according to the ConsumerWise Research series,which tracks shifting economic moods and shopping behaviors.

Rising prices and inflation were by far consumers’ greatest concern, cited by 53% of respondents — more than twice the sharewho cited the second most common concern, the ability to make ends meet.

Roughly one quarter of respondents said “stabilizing inflation” was among their top three reasons forfeeling optimistic, reflecting a split among U.S. consumers based on their perceptions of prices.

Still, consumers reported plans to reduce spending across a range of discretionarypurchases.

Of the 22 categories in the survey, pet-care services was the only one with net spending intent at zero or above. Every other category reported came in as a negative spend number or”net spending intent.”

The study revealed a -45% net spending intent for home decor, far more consumers said they plan to cut back on decorating their homes than plan to increase theirspending.

Similar to home decor, furniture has a net spending intent. This means the group of people planning to cut back on furniture is 45 percentage points larger than the group planning tospend more.

People are also cutting back on treats, trips, and eating out. Shoppers are reducing how much they spend on experiences.

U.S. consumers plan to do holiday shoppinggradually throughout the fall. Ten percent said they had already begun their holiday shopping when surveyed, while 5% planned to start in August, 11% in September, and 19% in October.

Intotal, 45% of respondents said they expected to begin their holiday shopping by the end of October.

AI is becoming part of the consumer holiday shopping plan. Forty-six percent said they woulddefinitely or probably use AI tools for holiday shopping, compared with 54% who said they probably or definitely would not.

Among likely AI users, the use of AI will likely center oncomparison and value, with 49% saying they will compare products or prices, 48% plan to find deals or discounts, and 47% plan to get gift ideas.

Chairman Warsh today emphasized that whileoverall economic activity remains healthy, underlying inflation is still running above the Fed’s 2% target, which confirms McKinsey’s data suggesting consumers are highly active but heavily pressuredby high prices, forcing them to be far more calculated with their dollar.