Goldman Sachs warns that a consumer slowdown could soon hit the economy as tax refunds dry up

Get ready for a consumer slowdown to hit the US economy, Goldman Sachs warns.

The Wall Street bank is flagging a handful of risks that loom over consumer spending, a key pillar for economic growth and corporate earnings.

While retail sales have been mostly solid so far this year, Americans appear poised to slash their pace of spending by about half in the coming months, Goldman said, estimating that real consumer spending growth could slow to as low as 1% in the second half of 2026. That compares to the 2.5% annual growth in personal consumption expenditures recorded in June, according to the Bureau of Economic Analysis.

If real PCE fell to 1%, it would mark the slowest pace of spending the US has seen since early 2021, around the time the economy was still recovering from the pandemic recession.

Americans are already showing signs they’re beginning to tighten their wallets. Retail sales dropped 0.6% in July, well below the expected 0.1% increase.

That drop was likely due to an “earlier-than-usual” Amazon Prime Day, Goldman said, pointing to how Amazon held its summertime Prime Day in June this year instead of July.

But the pressure looks like it’s expected to stick with consumers, the bank said, pointing to fading tailwinds from springtime tax refunds and the lingering effects of higher energy prices. Brent oil, the international benchmark, ticked higher to $89 a barrel on Monday, up around 22% from levels before the start of the Iran war.

“The revised sequential path now looks much more consistent with our view that the strength of real consumer spending in the spring was the temporary byproduct of the tax refund surge. We expect real consumer spending growth to slow to 1-1.5% in H2 as real cash flow stagnates,” Ronnie Walker, a senior economist at the bank, wrote in a note on Sunday.

A consumer slowdown has been on the minds of more Wall Street forecasters this year, particularly as economists weigh the impact of higher oil prices and the cumulative effects of elevated inflation in recent years.

In a June survey conducted by Primerica, 71% of middle-income Americans said their income was falling behind the cost of living, and 46% said they had cut back on “everyday spending,” the financial services firm said.