The news: Consumers may be feeling the squeeze, but so far, those pressures haven’t translated into slower spending. Consumer spending grew 3.8% YoY in Q3 2026, matching Q2’s pace despite elevated gas prices and persistent inflation, per the Bureau of Economic Analysis.

The resilience is striking given the pressure on household budgets:

Inflation: The Fed’s preferred inflation gauge, the Personal Consumption Expenditures Price Index, rose 3.6% YoY and 0.5% MoM in September, up from 3.4% YoY in each of the previous two months. Core PCE, which excludes food and energy, rose 3.1% YoY and 0.3% MoM.

Income: Real disposable income fell 0.3% in September, its first decline since April.

Savings: The personal savings rate fell to 3.8%, its lowest level since 2022, suggesting households have less of a cushion to absorb rising costs.

These pressures help explain why the Conference Board’s Consumer Confidence Index has trended downward over the past several years.

Why it matters: While elevated gasoline prices have inflated headline retail sales, the strength goes beyond higher prices. After adjusting for inflation, we expect real retail sales to grow at more than twice last year’s rate. Consumers’ willingness to keep spending, combined with their ability to adapt how and where they shop, has made us more bullish on retail growth this year, including during the holiday season.

Earlier this month, we raised our forecasts for both full-year and holiday retail sales.

• We now expect full-year retail sales to grow 5.4%, up from our 4.3% forecast in June.