The consumer—that indefatigable engine of American economic growth—is sending decidedly mixed signals heading into 2026. While spending continues to power through by sheer momentum, a growing body of evidence suggests the new year may bring a meaningful pullback that could reshape the retail landscape.

According to AlixPartners' 2026 Global Consumer Outlook, a survey of more than 13,000 consumers across nine countries, heightened caution, intensified frugality, and a decisive focus on financial discipline will define consumer behavior in the coming year. The swing toward lower planned spending has widened by more than 60% compared to previous surveys.

The Paradox of the Resilient-But-Cautious Consumer

The consumer is resilient, but the consumer is cautious. Americans are feeling down about the economy, but Americans are still buying. It was a year of record-breaking spending, but those numbers aren't adjusted for inflation.

This paradox has defined 2025 and shows no signs of resolution. The findings present a puzzle that economists are still working to solve: consumers continue to spend even as their attitudes turn sour.

"We're seeing a disconnect between what consumers say and what they do. They tell us they're worried about the economy, but they keep buying. The question is how long that gap can persist."

— Consumer behavior researcher

Where the Pullback Will Hit

According to the AlixPartners survey, Americans plan to scale back across multiple discretionary categories in 2026:

  • Eating and drinking out: Restaurant spending faces significant headwinds as consumers prioritize home cooking
  • Discretionary retail: Non-essential purchases expected to decline as shoppers become more selective
  • Travel: Trip planning showing signs of moderation after revenge travel boom
  • Fitness: Gym memberships and wellness spending face scrutiny as budgets tighten

Perhaps most telling: consumers increasingly say they plan to save any extra money rather than spend it, with that preference up 4 percentage points from 2025.

The K-Shape Divide Deepens

The most concerning aspect of current consumer dynamics is the widening gap between high-income and low-income households. Data from the Bank of America Institute published December 22 illustrates the stark divide:

  • Top third of income distribution: Spending up 4% year-over-year in November—the fastest growth in four years
  • Lowest third of income distribution: Spending up less than 1% over the same period

This K-shaped pattern, where the wealthy flourish while lower-income consumers struggle, creates a precarious foundation for economic growth. Deloitte's analysis is blunt: "The bottom half of the economy is already in recession to some extent."

The Concentration Risk

The wealthiest 10% of consumers now generate nearly half of all spending in the United States. This concentration creates systemic vulnerability—if high-income households pull back for any reason, there's no lower-income spending to cushion the blow.

Tariffs: The Looming Threat

Analysts warn that the worst of tariff impacts may still be ahead. "We have not seen the worst of the tariffs yet," notes the research, which could potentially raise prices on a wider array of goods in 2026.

Some retailers appear to be waiting until the first quarter of 2026 to pass along higher costs, meaning consumers may face a fresh wave of price increases just as their spending intentions are already softening.

Sentiment Collapse

Consumer confidence metrics paint a troubling picture:

  • University of Michigan consumer sentiment finished 2025 nearly 30% lower than its final 2024 reading
  • Conference Board confidence hit its lowest level since 2021 (excluding April's tariff-induced dip)
  • A Marist poll shows Americans "cloaked in pessimism" about the new year
  • Seven in ten residents say the cost of living in their area is not affordable
  • About one in three say their personal finances have deteriorated in the past year

Holiday Spending: A Misleading Signal?

The National Retail Federation announced that, for the first time, Americans likely spent $1 trillion during the 2025 holiday season. But context matters: those numbers aren't adjusted for inflation, and much of the spending was fueled by credit rather than income growth.

Morgan Stanley Research forecasts year-over-year growth of 3.7% for nominal spending in 2025 and 2.9% in 2026—a meaningful deceleration from 2024's 5.7% expansion.

Three Forces Driving the Slowdown

Morgan Stanley identifies three main factors behind the expected spending moderation:

1. Cooling Labor Market
Job growth has slowed substantially, and while unemployment remains historically low, the "dead calm" in hiring limits income growth and creates psychological uncertainty.

2. Tariff-Induced Inflation
New tariffs are expected to push prices higher in 2026, particularly on imported goods. This inflation hits lower-income consumers hardest, as they spend a larger share of income on essentials.

3. Policy Uncertainty
Businesses and consumers alike are hesitant to make major commitments when the policy environment remains unpredictable. This uncertainty dampens both investment and consumption.

What It Means for Investors

The consumer spending outlook has significant implications for equity investors:

Discretionary retailers: Expect continued pressure on companies dependent on non-essential spending. Focus on firms with strong value propositions or loyal customer bases.

Restaurant stocks: The eating-out pullback suggests headwinds for casual dining and fast casual concepts, though quick-service restaurants with value offerings may prove more resilient.

Luxury goods: High-income consumers remain healthy, suggesting premium brands may outperform mass-market peers.

Consumer staples: Defensive positioning may be warranted as spending shifts toward essentials.

The Bottom Line

After years of defying gravity, the American consumer may finally be approaching a inflection point. The K-shaped divide ensures that aggregate spending numbers mask divergent realities: affluent households continue to thrive while lower-income Americans face genuine hardship.

For businesses and investors alike, 2026 will require nuanced understanding of these dynamics. The consumer isn't collapsing—but neither is she the inexhaustible spending engine that powered the post-pandemic recovery. Prepare for a more selective, more cautious, and more divided consumer landscape in the year ahead.