Interview, Other
The Consumer’s Summer Spending Surge
- Consumer spending growth is projected to be slightly choppy in the near term due to the expiration of the World Cup effect and the reversal of online promotion spending, though strong momentum is anticipated for the broader year despite potential monthly deceleration following the June surge.
- Spending may outpace wage growth across all income cohorts in the near term, creating potential tension, even as headwinds are expected to increase in the second half of the year as tailwinds like bumper tax refunds dissipate.
- Lower income consumers are expected to continue narrowing the spending gap with higher income groups, driven by after-tax wage growth reaching 4.1 percent by June, a trend that may keep the gap near its May 2026 low with uncertain sustainability.
- The labor market outlook is expected to remain solid, supporting wage improvements for lower income households through a pickup in job-to-job changes, with younger workers typically securing raises exceeding 10 percent when switching jobs.
- Foreign tourist spending is forecast to remain a positive but difficult-to-calibrate factor boosting U.S. consumer spend, with modest rises in hotel occupancy and restaurant spending for lower income households in host cities exceeding 8 percent year-over-year.
- The World Cup is projected to have a negligible impact on future labor market improvements, as job growth acceleration is observed in both host and non-host cities, while the current June spending surge is attributed partly to year-over-year comparisons of shifted online retail promotions.
- Sustainability of the narrowing K-shaped spending dynamic depends on pinning hopes on labor market improvements and ensuring middle income spending growth converges upward to prevent losing this key demographic.
- Foreign tourist impact is not expected to be disappointing, with TSA data showing passenger volumes remaining relatively flat compared to the previous year, while the Institute views the broader labor market as the foundation for resolving the K-shaped dynamic.