Goldman Sachs cuts US consumer spending growth forecast due to soaring oil prices

Investing.com – Goldman Sachs cut its forecast for growth in 2026 U.S. consumer disposable cash flow inflows from 5.1% estimated in January to 4.2%, citing headwinds from higher oil prices caused by the Middle East war and disruptions to oil flows through the Strait of Hormuz.

The firm currently expects core spending in 2026 to increase, but says it will be offset by falling interest rates and eased financial burdens, along with a slightly lower savings rate than in 2025.

Goldman Sachs economists reduced their outlook for 2026 disposable personal income growth from 5.2% forecast in January to 5.0%, reflecting recent geopolitical developments and the latest macro backdrop.

The firm said that a somewhat hawkish stance at the most recent Federal Open Market Committee meeting could limit the pace of rate cuts this year. However, Goldman Sachs economists continue to believe their forecast of two 25-basis-point cuts in 2026 is reasonable, and they think concerns about a recession could trigger more aggressive easing.

Goldman Sachs currently expects core spending growth in 2026 to be higher due to rising energy costs and food spending. The updated forecast for disposable cash flow inflow growth is 4.2%, only slightly improved from 4.1% growth in 2025.

The firm lowered its forecast for the 2026 savings rate from 5.6% assumed in January to 4.5%. This puts overall U.S. household growth in after-tax disposable cash flow inflows at 4.2% in 2026, below 5.1% in 2025.

For the lowest-income fifth of the population, disposable cash flow inflow growth in 2026 is 0.8%, a significant slowdown from 2.4% growth in 2025, due to rising energy and food costs and expected cuts to Medicaid and food stamps.

Due to the Middle East war and disruptions to oil flows through the Strait of Hormuz, oil prices have surged sharply in recent weeks. Goldman Sachs commodity strategists assume the Strait of Hormuz will remain shut through mid-April and expect that, in an adverse scenario, Brent crude prices will approach or exceed the record levels of 2008 before falling back to $100 per barrel in the fourth quarter of 2026, or to $115 per barrel under a severe adverse scenario.

The firm believes that if pricing of $100 per barrel holds steady, the overall consumer purchasing power of U.S. households in 2026 would face adverse impacts of more than 50 basis points, while the lowest-income fifth of households would face adverse impacts of about 135 basis points.

Goldman Sachs economists expect that spending headwinds from rising inflation will weigh on growth for the remainder of this year, and they forecast that the labor market will weaken if higher energy prices create a bigger drag on growth, or if the number of job losses related to artificial intelligence exceeds expectations.

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