Consumer Spending Declined In July. Goldman Sachs Expects It To Fall Further.

Figures related to consumption in the U.S. fell in July, dampening the outlook of the country's economy. And a top Goldman Sachs analyst believes the trend will deteriorate further.

"We expect sluggish consumer spending growth ahead," Goldman Sachs' Jan Hatzius wrote in a note picked up by Yahoo Finance.

"Although Friday's drop in July retail sales partly reflected the negative impact of an earlier-than-usual Amazon Prime day, the revised sequential path now looks much more consistent with our view that the strength of real consumer spending in the spring was the temporary byproduct of the tax refund surge. We expect real consumer spending growth to slow to 1-1.5% in the second half as real cash flow stagnates."

Figures from the University of Michigan's Surveys of ​Consumers released last Friday showed that consumer sentiment dropped sharply in August, falling to 51.0 compared to 55.2 in July.

The figure is significantly lower than that given by economists surveyed by Reuters, who expected it to clock in at 54.5. The one from August 2025 stood at 58.2, marking a 7.6% decrease.

Joanne Hsu, the director of the Surveys of Consumers, highlighted the drop among Republicans, saying it is the "lowest since the 2024 election."

"Although the early-month weakening ​in sentiment was ​pervasive ⁠across various demographic groups, notably large reductions were seen among older ​consumers, lower-income consumers, and those without ​a ⁠college degree."

"These groups are all particularly vulnerable to any erosion of purchasing power stemming from inflation. Across all consumers, only 8% expect their income growth to exceed inflation in the year ahead, down from 18% in December 2024, a reflection of the belief that high prices will continue to be burdensome," the report adds.

Figures from retail sales add to the picture. They declined unexpectedly in July, notching the biggest drop since May 2025, according to data from the Commerce Department.

Analysts will get additional information this week with earnings reports from retail giants like Lowe's, Walmart, Target and Home Depot.