Research
May 14, 2026
Consumer outlook
Tax refunds shifted from a catalyst for growth to a cushion against higher gas prices
Consumers are just over two months into the current surge in gasoline prices, and any negative impacts on spending have thus far been elusive to find. The national average for a gallon of regular gasoline jumped from below $3 in late February to $4.50 this week, according to the Energy Information Administration.
Yet many measures of consumer activity point toward continued resiliency, including the April retail sales report from the U.S. Census Bureau. Excluding gasoline stations, total retail sales were up 1.0% during the last two months. That included a 0.7% increase in eating and drinking place sales during the two-month period.
This year’s sizable tax refunds – which were expected to be a catalyst for economic growth – may instead be acting as a cushion to absorb the sharply higher gas prices. While that may support continued spending in the immediate term, it will result in a faster depletion of one of this year’s top expected drivers of growth.
Another positive factor supporting consumers was the recent stabilization in the labor market, which flashed signs of faltering during the second half of 2025. The economy added a net 304,000 jobs during the first four months of 2026, which was nearly three times more jobs than were added during the entirety of 2025.
The reemergence of job growth, along with an unemployment rate that remains historically low at 4.3%, will likely give consumers a confidence boost as they enter the summer travel and spending season.
Household balance sheets on the aggregate remain relatively healthy as well. Although debt levels continue to rise, they remain manageable when compared to disposable income. Household wealth also continues to trend higher, which buoys the spending of consumers with homes and investments.
Overall, the latest data point to a generally stable environment for consumers, though the outlook remains clouded with uncertainties. As long as the recent surge in gasoline prices is short-lived, it’s likely that consumers on the aggregate will maintain their willingness and ability to continue spending in 2026.
This article presents the latest trends in key indicators that impact consumer activity. Visit this page throughout the year for ongoing analysis of the state of the American consumer.
Labor market regained some momentum
Job growth in the national economy was choppy during the last year, often alternating between sizable gains and declines on a month-to-month basis. The labor market appeared to stabilize more recently, as payrolls registered solid gains in three of the last four months. The 304,000 net new jobs added thus far in 2026 was a significant improvement from the job losses during the second half of 2025.
Consumer confidence dampened, but gradually improving
Coinciding with the slowdown in the labor market, The Conference Board’s Consumer Confidence Index showed signs of rising economic uncertainty among households. This measure of consumer sentiment trended steadily lower into 2026, before ticking slightly higher during the last three months. The downward trend was largely due to declines in the expectations component of the index, which measures consumers’ short-term outlook for income, business, and labor market conditions. Consumers’ assessment of current economic conditions also deteriorated in recent months, with February’s reading representing a 5-year low.
Wage growth slowed in recent months
Along with a choppy labor market, wage growth slowed in recent months. Average hourly earnings of private sector employees increased 3.6% between April 2025 and April 2026. That was more than 2 percentage points below the strong gains posted during 2022. Despite the recent slowdown, wage growth remained above the 3.3% average increase during 2019.
Savings rate declined in recent months
Although nominal personal income continues to rise at a moderate pace, persistent inflation means growth is somewhat muted in inflation-adjusted terms. At the same time, consumer spending has been outpacing income growth, which means many households are tapping into their savings to support these expenditures. This led to the personal savings rate falling to 3.6% in March, which is nearly two full percentage points below the early-2025 readings. It was also well below the pre-pandemic savings rate, which averaged 6.5% between 2017 and 2019.
Household wealth surged in recent quarters
Household wealth continues to trend sharply higher, rising by more than $2 trillion in the fourth quarter of 2025. That followed an increase of more than $13 trillion during the previous two quarters, and represented the eighth increase in the last nine quarters. The only interruption of the positive trendline was a modest dip in the first quarter of 2025, which was due largely to a decline in the stock market. In total during the last nine quarters, total household net worth jumped by more than $32 trillion. That positively impacts consumers’ willingness to spend on discretionary items, including restaurants.
Household debt continues to rise
Household debt trended steadily higher in recent years, with aggregate balances reaching $18.8 trillion by 2026:Q1. Mortgages represent the bulk of household debt at 70%, followed by auto loans (9%), student loans (9%) and credit cards (7%).
Debt to income ratio remains manageable
Even though debt levels are rising, it remains manageable in relation to income. In the first quarter of 2026, the total household debt balance was 80% of total disposable personal income. Aside from two quarters during the pandemic, that’s the lowest debt-to-income ratio in more than two decades. It’s also well below the record highs of more than 116% registered during the Great Recession in 2007 and 2008.
Revolving credit balances continue to rise
Revolving consumer credit rose sharply during the last 5 years, following an early-pandemic period during which balances dropped by more than 12%. By March 2026, total revolving credit balances topped $1.3 trillion, which was $291 billion (or 28%) above their pre-pandemic peak. While balances continue to rise, the rate of growth slowed somewhat in recent months. Total revolving credit balances rose 3.5% during the last 12 months, which was well below the strong gains posted during the previous 4 years
Debt service remains in check
Despite the elevated debt levels, debt service remains manageable for households on the aggregate. The Federal Reserve’s Debt Service Ratio, which is the ratio of total required household debt payments to total disposable income, was just over 11% in 2025:Q4. While that was higher than the lows posted during the first half of 2021, it remained slightly below pre-pandemic readings.
Overall delinquency rates are trending higher
While debt service levels remained manageable in historical terms, overall delinquency rates trended higher in recent quarters. As of 2026:Q1, just under 4.8% of outstanding household debt was in some stage of delinquency. That was down slightly from the 2025:Q4 level, and followed six consecutive quarters of rising delinquency rates. Still, it was up more than 2 full percentage points from the recent low of 2.5% in 2022:Q4, and remained near the highest level since 2017:Q3 (4.9%).
Credit card delinquencies are up sharply
Along with the recent rise in overall delinquency rates, the percentage of credit cards that were severely delinquent trended sharply higher in recent quarters. As of 2026:Q1, 13.1% of credit card debt was at least 90 days delinquent. That was up from a recent low of 7.6% in 2022:Q3 and represented the highest level in 15 years.
Yet many measures of consumer activity point toward continued resiliency, including the April retail sales report from the U.S. Census Bureau. Excluding gasoline stations, total retail sales were up 1.0% during the last two months. That included a 0.7% increase in eating and drinking place sales during the two-month period.
This year’s sizable tax refunds – which were expected to be a catalyst for economic growth – may instead be acting as a cushion to absorb the sharply higher gas prices. While that may support continued spending in the immediate term, it will result in a faster depletion of one of this year’s top expected drivers of growth.
Another positive factor supporting consumers was the recent stabilization in the labor market, which flashed signs of faltering during the second half of 2025. The economy added a net 304,000 jobs during the first four months of 2026, which was nearly three times more jobs than were added during the entirety of 2025.
The reemergence of job growth, along with an unemployment rate that remains historically low at 4.3%, will likely give consumers a confidence boost as they enter the summer travel and spending season.
Household balance sheets on the aggregate remain relatively healthy as well. Although debt levels continue to rise, they remain manageable when compared to disposable income. Household wealth also continues to trend higher, which buoys the spending of consumers with homes and investments.
Overall, the latest data point to a generally stable environment for consumers, though the outlook remains clouded with uncertainties. As long as the recent surge in gasoline prices is short-lived, it’s likely that consumers on the aggregate will maintain their willingness and ability to continue spending in 2026.
This article presents the latest trends in key indicators that impact consumer activity. Visit this page throughout the year for ongoing analysis of the state of the American consumer.
Labor market regained some momentum
Job growth in the national economy was choppy during the last year, often alternating between sizable gains and declines on a month-to-month basis. The labor market appeared to stabilize more recently, as payrolls registered solid gains in three of the last four months. The 304,000 net new jobs added thus far in 2026 was a significant improvement from the job losses during the second half of 2025.
Consumer confidence dampened, but gradually improving
Coinciding with the slowdown in the labor market, The Conference Board’s Consumer Confidence Index showed signs of rising economic uncertainty among households. This measure of consumer sentiment trended steadily lower into 2026, before ticking slightly higher during the last three months. The downward trend was largely due to declines in the expectations component of the index, which measures consumers’ short-term outlook for income, business, and labor market conditions. Consumers’ assessment of current economic conditions also deteriorated in recent months, with February’s reading representing a 5-year low.
Wage growth slowed in recent months
Along with a choppy labor market, wage growth slowed in recent months. Average hourly earnings of private sector employees increased 3.6% between April 2025 and April 2026. That was more than 2 percentage points below the strong gains posted during 2022. Despite the recent slowdown, wage growth remained above the 3.3% average increase during 2019.
Savings rate declined in recent months
Although nominal personal income continues to rise at a moderate pace, persistent inflation means growth is somewhat muted in inflation-adjusted terms. At the same time, consumer spending has been outpacing income growth, which means many households are tapping into their savings to support these expenditures. This led to the personal savings rate falling to 3.6% in March, which is nearly two full percentage points below the early-2025 readings. It was also well below the pre-pandemic savings rate, which averaged 6.5% between 2017 and 2019.
Household wealth surged in recent quarters
Household wealth continues to trend sharply higher, rising by more than $2 trillion in the fourth quarter of 2025. That followed an increase of more than $13 trillion during the previous two quarters, and represented the eighth increase in the last nine quarters. The only interruption of the positive trendline was a modest dip in the first quarter of 2025, which was due largely to a decline in the stock market. In total during the last nine quarters, total household net worth jumped by more than $32 trillion. That positively impacts consumers’ willingness to spend on discretionary items, including restaurants.
Household debt continues to rise
Household debt trended steadily higher in recent years, with aggregate balances reaching $18.8 trillion by 2026:Q1. Mortgages represent the bulk of household debt at 70%, followed by auto loans (9%), student loans (9%) and credit cards (7%).
Debt to income ratio remains manageable
Even though debt levels are rising, it remains manageable in relation to income. In the first quarter of 2026, the total household debt balance was 80% of total disposable personal income. Aside from two quarters during the pandemic, that’s the lowest debt-to-income ratio in more than two decades. It’s also well below the record highs of more than 116% registered during the Great Recession in 2007 and 2008.
Revolving credit balances continue to rise
Revolving consumer credit rose sharply during the last 5 years, following an early-pandemic period during which balances dropped by more than 12%. By March 2026, total revolving credit balances topped $1.3 trillion, which was $291 billion (or 28%) above their pre-pandemic peak. While balances continue to rise, the rate of growth slowed somewhat in recent months. Total revolving credit balances rose 3.5% during the last 12 months, which was well below the strong gains posted during the previous 4 years
Debt service remains in check
Despite the elevated debt levels, debt service remains manageable for households on the aggregate. The Federal Reserve’s Debt Service Ratio, which is the ratio of total required household debt payments to total disposable income, was just over 11% in 2025:Q4. While that was higher than the lows posted during the first half of 2021, it remained slightly below pre-pandemic readings.
Overall delinquency rates are trending higher
While debt service levels remained manageable in historical terms, overall delinquency rates trended higher in recent quarters. As of 2026:Q1, just under 4.8% of outstanding household debt was in some stage of delinquency. That was down slightly from the 2025:Q4 level, and followed six consecutive quarters of rising delinquency rates. Still, it was up more than 2 full percentage points from the recent low of 2.5% in 2022:Q4, and remained near the highest level since 2017:Q3 (4.9%).
Credit card delinquencies are up sharply
Along with the recent rise in overall delinquency rates, the percentage of credit cards that were severely delinquent trended sharply higher in recent quarters. As of 2026:Q1, 13.1% of credit card debt was at least 90 days delinquent. That was up from a recent low of 7.6% in 2022:Q3 and represented the highest level in 15 years.