U.S. Consumer Resilience Increase Projected to Persist Throughout 2026
The international credit rating agency highlighted that consumer expenditures jumped 0.6% during last year's opening quarter, accelerated to 2.6% in Q2, and surged 3.5% year-over-year by the third quarter, according to its statement.
Year-over-year household nominal disposable income expanded 4.4% in 2024's final quarter, propelled by modest job market expansion and consistent nominal wage increases, Fitch reported.
Yet the agency observed that real disposable income growth decelerated to 1.6% year-over-year by December 2025, a notable decline from 2024's 2.8% rate, partially attributed to weakening labor market conditions.
"Nominal wage gains for higher-income households are now outpacing those for lower-income households, reinforcing the K-shaped narrative -- especially as inflation hits lower-income households harder," Fitch said.
American Household Wealth Reaches Unprecedented Peak
Fitch indicated US consumer net worth climbed 3.5% year-over-year in last year's third quarter, bolstered by persistent stock market strength, hitting an all-time record and delivering positive momentum for consumer expenditures.
Household debt-service obligations held relatively stable during Q2 2025 at 11.3% of disposable income, Fitch noted, remaining beneath the pre-pandemic threshold of 11.7%.
Fed Rate Cut Forecast: Two Reductions Expected
Olu Sonola, head of US economic research at Fitch Ratings, said the Federal Reserve will continue to closely monitor labor market conditions but is expected to cut interest rates twice in 2026.
The projection aligns with inflation persisting above 3%, he noted.
"Fitch projects consumption growth to average 2.1% in 2025 and ease to 1.7% in 2026," he said.
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