Goldman cuts US consumer spending growth forecast on oil price surge.

Investing.com -- Goldman Sachs lowered its 2026 discretionary cash inflow growth forecast for US consumers to 4.2% from a previous estimate of 5.1% in January, citing headwinds from rising oil prices due to the war in the Middle East and disruptions to oil flows through the Strait of Hormuz.

The bank now expects higher essential spending in 2026, offset by easing interest rates and financial obligations and a marginally lower savings rate compared to 2025.

Goldman Sachs economists reduced disposable personal income growth expectations to 5.0% for 2026 from 5.2% projected in January, reflecting the recent geopolitical situation and updated macro backdrop.

The bank noted that a somewhat hawkish stance in the most recent FOMC meeting could limit the pace of interest rate cuts this year. However, Goldman economists continue to view their forecast for two 25 basis point rate cuts in 2026 as reasonable, believing that recession concerns could trigger more aggressive cuts.

Goldman now expects higher essential expenditure growth in 2026 due to increased energy costs and food spending. The updated forecast for discretionary cash inflow growth of 4.2% represents only a marginal improvement from 4.1% growth in 2025.

The bank lowered its 2026 savings rate forecast to 4.5% of disposable personal income from a previous assumption of 5.6% in January. This drives aggregate US household adjusted discretionary cash flow growth of 4.2% in 2026, down from 5.1% in 2025.

For the bottom-quintile income group, discretionary cash inflow growth of 0.8% in 2026 represents a notable slowdown from 2.4% growth in 2025, due to higher energy and food costs along with anticipated Medicaid and SNAP cuts.

Oil prices have risen sharply in recent weeks as a result of the war in the Middle East and disruptions to oil flows through the Strait of Hormuz. Goldman commodity strategists assume the Strait of Hormuz will remain closed until mid-April and expect Brent oil prices to approach or exceed their 2008 record before moderating to $100 in the fourth quarter of 2026 under an adverse scenario or to $115 under a severely adverse scenario.

The bank sees over 50 basis points headwind for consumer discretionary spending power for US households in aggregate in 2026, and approximately 135 basis points headwind for the bottom-quintile, assuming $100 per barrel pricing holds.

Goldman economists expect spending headwinds from higher inflation to weigh on growth for the rest of the year and anticipate labor market weakening if higher energy prices create a larger drag on growth or if AI-related job losses prove greater than expected.