:max_bytes(150000):strip_icc()/GettyImages-2247574542-26b8d17117454f79a607156351cac13b.jpg "Consumers Enter 2026 With More Reasons to Spend Cautiously")
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Key Takeaways
- Retail sales were flat in December after a strong start to the holiday shopping season, Census Bureau data showed.
- After several months of strong consumer spending, weakening economic fundamentals could mean that spending growth will slow this year.
- Inflation, a weakening job market and a potential stall in stock price growth could keep more consumers home this year, economists said.
After years of revving up the economy, are consumers set to tap the brakes on their spending?
New data shows that retail sales stalled in December, falling short of expectations after several months of robust growth. And it could be an early signal that consumers are set to pull back their spending in 2026 as more face a worrisome jobs market.
“Consumer spending growth has been strong, although I think you can argue it has slowed at least a little bit,” said Scott Hoyt, senior director for Moody’s Analytics, who has also forecasted a slowdown in consumer spending growth this year. ”Part of it is because the labor market is so weak, we’re not adding a lot of jobs, and nobody seems to expect that to change materially.”
Consumer spending makes up around two-thirds of the U.S. economy, meaning even slight slowdowns can have a meaningful impact on economic activity.
Why This Matters to You
When consumer spending cools, it can ripple through the economy because households drive about two-thirds of U.S. growth, shaping everything from corporate profits and stock prices to hiring and interest-rate policy.
Weakening Stocks and Labor Market Woes Could Slow 2026 Spending Growth
A cooling labor market is likely to be one of the biggest drags on consumer spending, Hoyt said. Recent data show that employers are adding fewer jobs while layoffs are accelerating.
Much of the recent support for consumer spending has come from the wealth effect, Hoyt said. Higher stock prices and increasing housing wealth have given more people the confidence to spend. The S&P 500 gained 16% in 2025, sending many consumers’ portfolios higher. However, a potential stock market slowdown could provide even more reason for consumers to keep their wallets pocketed this year.
“Part of it is expectations for a weaker stock market, for it to go relatively flat,” Hoyt said. “That’ll take some of the punch out of the spending by the higher-income folks.”
Slow Sales Dampen Retailers Holiday Season
Initial data suggests the pullback could already be underway.
Economists surveyed by The Wall Street Journal and Dow Jones Newswires projected that retail sales would grow by 0.3% in December after a hot November. Instead, the Census Bureau reported today that sales were flat, making the holiday shopping season a little less merry for some sellers.
“That’s not what investors—or retailers—wanted to see coming out of the critical holiday shopping period,” wrote Bret Kenwell, eToro U.S. investment analyst.
Scott Anderson, chief U.S. economist at BMO Economics, said a mix of weakening economic fundamentals has begun to take a toll on the American consumer.
“Slower real disposable personal income growth, a softening labor market, and declining saving rates finally appear to have diminished the U.S. consumers’ willingness and ability to spend, at least temporarily,” Anderson wrote.
But while sales slowed to end last year, some economists argue it doesn’t guarantee that consumers will stay home this year.
“A weak end isn’t necessarily indicative of the start of a new consumer trend,” wrote Wells Fargo economists Tim Quinlan and Shannon Grein. “The latest data ultimately suggest households are still broadly spending in the face of sustained and compounding inflation and an uncomfortable moderation in the jobs market.”
