We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Fading tax-refund support could slow U.S. consumer spending in the second half.
A widening income divide may favor staples and higher-end retailers.
Consumer-focused and small-cap ETFs could face pressure as demand moderates.
The U.S. consumer has remained surprisingly resilient this year despite elevated gasoline and food prices. However, that strength could soon face a tougher test, according to Goldman Sachs economists, as quoted on Yahoo Finance.
Consumer-facing companies posted decent second-quarter results. As of Aug. 12, 2026, about 90% of S&P 500 companies had reported Q2 earnings. Through that date, S&P 500 consumer discretionary companies reported a 3.9% year-over-year increase, retail sales surged 15.5%, while sales at consumer staples companies increased 5.7%, per Earnings Trends.
Tax Refund Boost May Fade
Goldman Sachs economist Jan Hatzius expects consumer spending to lose momentum in the second half of the year. Hatzius said the spring strength in real consumer spending was likely supported by a surge in tax refunds, a boost that may not persist, as quoted in the same Yahoo Finance article.
While July retail sales were partly affected by an earlier-than-usual Amazon Prime Day, the revised data appear more consistent with Goldman Sachs' view that consumer spending is set to moderate.
Retail sales grew 0.6% in July from a year earlier, missing the estimate of a 1.5% jump and slowing from 1% growth in June, as quoted on CNBC. Goldman Sachs expects real consumer spending growth to slow to 1%-1.5% in the second half as real household cash flow stagnates, as quoted on the same Yahoo Finance article.
Income Divide Is Emerging
Despite the overall resilience, consumer behavior is becoming increasingly uneven.
Procter & Gamble CFO Andre Schulten recently said higher-income consumers continue to spend on the company's latest innovations. Meanwhile, lower-income shoppers remain cautious about when they refill household products and which items they purchase.
This growing divide could become more visible if household cash flows weaken in the months ahead. Data from the Federal Reserve Bank of Atlanta shows wages for the highest-paid workers are rising faster than wages for the lowest-paid workers, as quoted on marketplace.org.
Deutsche Bank analyst Krisztina Katai cautioned that generating incremental sales could become more difficult in an environment where consumers are cautious and retailers may need to rely more heavily on promotions, as quoted on the above-mentioned source.
Growth Hinged On Consumers in Q2: Tough Time in Q3?
The potential slowdown comes as the broader U.S. economy is already losing momentum. GDP grew at an annualized 1.5% pace in the second quarter, down from 2.1% in the first quarter.
Consumer spending, however, accelerated sharply to a 3.2% annualized rate from just 0.5% in the first quarter, making it the primary driver of underlying private domestic demand.
As the U.S. consumer remains a key pillar of economic growth, fading tax-refund support, stagnant real cash flow and increasingly cautious lower-income shoppers could weaken spending momentum in Q3.
ETFs to Gain
State Street Consumer Staples Select Sector SPDR ETF (XLP - Free Report)
Consumer staples may gain even if U.S. consumer spending weakens because these companies sell essential goods that people continue to buy during economic slowdowns. Their defensive nature and relatively stable earnings can also make them more attractive to investors amid rising economic uncertainty.
The fund provides exposure to retailers that can benefit from resilient spending among financially stronger consumers. With the U.S. economic recovery being K-shaped, ETFs focused on higher-end retailers should gain.
State Street Financial Select Sector SPDR ETF (XLF - Free Report)
Higher-income households with stronger balance sheets, along with resilient credit demand, can support financial companies and related ETFs like XLF.
State Street SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report)
If consumer spending slows, the labor market weakens, and inflation remains sticky, the Fed is likely to stay put at its upcoming meetings. If interest rates remain relatively low, growth ETFs like SPYG should perform well.
If discretionary spending slips in the coming days, the RSPD ETF may feel the pinch. The fund does not put more than 3% of its assets in a single stock.
View the Zacks #1 Rank List
Image: Bigstock
Consumer Spending Loses Steam? ETFs to Gain/Lose
Key Takeaways
The U.S. consumer has remained surprisingly resilient this year despite elevated gasoline and food prices. However, that strength could soon face a tougher test, according to Goldman Sachs economists, as quoted on Yahoo Finance.
Consumer-facing companies posted decent second-quarter results. As of Aug. 12, 2026, about 90% of S&P 500 companies had reported Q2 earnings. Through that date, S&P 500 consumer discretionary companies reported a 3.9% year-over-year increase, retail sales surged 15.5%, while sales at consumer staples companies increased 5.7%, per Earnings Trends.
Tax Refund Boost May Fade
Goldman Sachs economist Jan Hatzius expects consumer spending to lose momentum in the second half of the year. Hatzius said the spring strength in real consumer spending was likely supported by a surge in tax refunds, a boost that may not persist, as quoted in the same Yahoo Finance article.
While July retail sales were partly affected by an earlier-than-usual Amazon Prime Day, the revised data appear more consistent with Goldman Sachs' view that consumer spending is set to moderate.
Retail sales grew 0.6% in July from a year earlier, missing the estimate of a 1.5% jump and slowing from 1% growth in June, as quoted on CNBC. Goldman Sachs expects real consumer spending growth to slow to 1%-1.5% in the second half as real household cash flow stagnates, as quoted on the same Yahoo Finance article.
Income Divide Is Emerging
Despite the overall resilience, consumer behavior is becoming increasingly uneven.
Procter & Gamble CFO Andre Schulten recently said higher-income consumers continue to spend on the company's latest innovations. Meanwhile, lower-income shoppers remain cautious about when they refill household products and which items they purchase.
This growing divide could become more visible if household cash flows weaken in the months ahead. Data from the Federal Reserve Bank of Atlanta shows wages for the highest-paid workers are rising faster than wages for the lowest-paid workers, as quoted on marketplace.org.
Deutsche Bank analyst Krisztina Katai cautioned that generating incremental sales could become more difficult in an environment where consumers are cautious and retailers may need to rely more heavily on promotions, as quoted on the above-mentioned source.
Growth Hinged On Consumers in Q2: Tough Time in Q3?
The potential slowdown comes as the broader U.S. economy is already losing momentum. GDP grew at an annualized 1.5% pace in the second quarter, down from 2.1% in the first quarter.
Consumer spending, however, accelerated sharply to a 3.2% annualized rate from just 0.5% in the first quarter, making it the primary driver of underlying private domestic demand.
As the U.S. consumer remains a key pillar of economic growth, fading tax-refund support, stagnant real cash flow and increasingly cautious lower-income shoppers could weaken spending momentum in Q3.
ETFs to Gain
State Street Consumer Staples Select Sector SPDR ETF (XLP - Free Report)
Consumer staples may gain even if U.S. consumer spending weakens because these companies sell essential goods that people continue to buy during economic slowdowns. Their defensive nature and relatively stable earnings can also make them more attractive to investors amid rising economic uncertainty.
VanEck Retail ETF (RTH - Free Report)
The fund provides exposure to retailers that can benefit from resilient spending among financially stronger consumers. With the U.S. economic recovery being K-shaped, ETFs focused on higher-end retailers should gain.
State Street Financial Select Sector SPDR ETF (XLF - Free Report)
Higher-income households with stronger balance sheets, along with resilient credit demand, can support financial companies and related ETFs like XLF.
State Street SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report)
If consumer spending slows, the labor market weakens, and inflation remains sticky, the Fed is likely to stay put at its upcoming meetings. If interest rates remain relatively low, growth ETFs like SPYG should perform well.
ETFs to Lose
Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RSPD - Free Report)
If discretionary spending slips in the coming days, the RSPD ETF may feel the pinch. The fund does not put more than 3% of its assets in a single stock.
iShares Russell 2000 ETF (IWM - Free Report)
Small-caps may fall if U.S. consumer spending weakens, as slower demand can hurt the revenues and earnings of smaller, domestically focused companies.