Goldman Warns Consumer Spending Will Continue to Decline Amid Stagnant Cash Flow

Figures related to consumption in the U.S. fell in July, dampening the outlook of the country's economy. According to a note from Goldman Sachs' Jan Hatzius, consumer spending growth is expected to slow down due to stagnant real cash flow.

The University of Michigan's Surveys of Consumers reported that consumer sentiment dropped sharply in August, falling to 51.0 compared to 55.2 in July. This figure is significantly lower than the expected 54.5 from economists surveyed by Reuters and marks a 7.6% decrease from last year.

The drop was seen across various demographic groups, with large reductions among older consumers, lower-income consumers, and those without a college degree. These groups are particularly vulnerable to erosion of purchasing power stemming from inflation, with only 8% expecting their income growth to exceed inflation in the year ahead, down from 18% in December 2024.

Additionally, retail sales declined unexpectedly in July, notching the biggest drop since May 2025. Analysts will get additional information this week with earnings reports from retail giants like Lowe's, Walmart, Target and Home Depot.