U.S. Consumers Spend with Caution Amid Inflation Fears

U.S. consumer spending grew 2.7% in annualized terms through 2025, a slight slowdown from 2.9% the prior year, fueled by wealth gains and savings dips despite a K-shaped recovery favoring high earners.[3] Economists at TD Economics now forecast 2.8% real growth in 2026, up from earlier 2.0% projections, thanks to easier financial conditions, higher tax refunds and labor market stabilization.[3] Yet a YouGov poll underscores the caution: 76% of Americans report more restrained spending, with 48% viewing the economy as worsening and 47% bracing for inflation spikes.[1] Early 2026 McKinsey data shows economic confidence holding steady post-holidays, with income as the top sentiment driver—wealthier households far more upbeat than others.[2] Baby boomers lead pessimism, while millennials top optimism lists, but all groups show flat essential spending intent and postholiday discretionary pullbacks.[2] Bright spots emerge in home improvement (net intent up 11 points from Q4 2025) and domestic flights (up 5 points), signaling selective splurges over broad retreats.[2] Inflation dominates worries, cited by 57% in an AlphaWise survey, alongside 43% fretting political unrest, prompting cuts in apparel (net intent -16%) and big-ticket items like furniture.[6] Near-term, 34% expect higher spending versus 15% lower—a positive 18% net above historical averages—prioritizing groceries, gas and household goods.[6] Tax refunds see just 30% funneled to daily buys; most bolster savings.[6] The Conference Board’s March 2026 report, cut off March 24, notes slightly dimmer income outlooks: 19.2% expect rises (up from 18.4% in February), but 13.9% foresee drops (up from 12.5%).[4] SightX’s nationwide study captures 'cautious optimism,' with finance confidence at 3.5/5 and half anticipating personal gains despite macro fears.[5] LG Ad Solutions echoes this, as 44% predict worsening food and goods costs, reshaping budgets proactively.[1] This resilience masks risks: Deloitte projects consumer spending growth slowing to 0.2% in 2027 and contracting 1% in 2028 amid weakening demand.[7] For now, the American consumer balances wage support with tomorrow’s uncertainties, keeping the economy afloat but on a tightrope.