Overview
Goldman Sachs has revised downward key pieces of its consumer outlook for 2026, trimming the bank's forecast for discretionary cash inflow growth to 4.2% from the 5.1% projection it published in January. The change reflects the bank's assessment that a recent spike in oil prices, driven by conflict in the Middle East and disruptions to oil flows through the Strait of Hormuz, will push essential spending higher and squeeze households' ability to spend on nonessential items.
Income, savings and discretionary cash
Alongside the reduction to discretionary cash inflow growth, Goldman economists lowered their expectation for disposable personal income growth in 2026 to 5.0%, down from 5.2% in the January outlook. The bank also pared its projection for the aggregate savings rate to 4.5% of disposable personal income in 2026, versus the prior assumption of 5.6% made in January. Those adjustments help explain why aggregate US household adjusted discretionary cash flow growth is now expected to be 4.2% in 2026, compared with 5.1% in 2025.
Goldman notes that the assumed moderation in interest burden and financial obligations in 2026 - a function of easing interest rates in the bank's baseline view - will provide some relief. Nevertheless, the elevated share of spending on essentials such as energy and food is expected to limit the improvement in discretionary cash flows, leaving the 2026 outcome only marginally above the 4.1% growth Goldman projects for 2025.
Distributional effects across income groups
The bank highlighted a sharp divergence in the outlook by income bracket. For households in the bottom quintile, Goldman now projects discretionary cash inflow growth of just 0.8% in 2026, a marked slowdown from 2.4% growth in 2025. The bank cites higher energy and food costs in combination with expected reductions in Medicaid and SNAP benefits as the primary drivers of the heavier burden on lower-income cohorts.
Oil price scenarios and commodity assumptions
Goldman commodity strategists have built scenarios that assume sustained disruption to flows through the Strait of Hormuz, with an operational closure assumed to persist until mid-April. Under their adverse scenarios, Brent crude prices could approach or exceed the 2008 record level before easing. In the bank's modeling, prices eventually moderate to $100 per barrel in the fourth quarter of 2026 under an adverse scenario, or to $115 per barrel under a severely adverse scenario.
Using a $100 per barrel assumption, Goldman calculates more than a 50 basis point headwind to consumer discretionary spending power for US households in aggregate in 2026, and roughly a 135 basis point headwind for the bottom-quintile cohort.
Monetary policy and labor market risks
Goldman observed that the Federal Open Market Committee's somewhat hawkish language at its most recent meeting could constrain the speed of rate cuts this year. Nevertheless, the bank maintains a baseline forecast that includes two 25 basis point reductions in policy rates in 2026, while acknowledging that heightened recession concerns could produce deeper easing.
The bank also warned that continued inflationary pressures driven by higher energy costs could damp growth through the rest of the year. Goldman economists expect that labor market conditions could weaken if higher energy prices impose a larger drag on activity, or if AI-related job losses turn out to be greater than anticipated.
Implications
Overall, Goldman Sachs' revised projections point to a constrained recovery in discretionary spending for 2026 relative to earlier expectations, with pronounced vulnerability among lower-income households and additional downside risks tied to commodity-driven inflation and the path of monetary policy.