US Consumer Report Card—Third Quarter 2026

The US consumer remains resilient but is gradually losing purchasing power, making a moderation in consumption growth increasingly likely.

• Western Asset assigns the consumer a B- score, or 62%, versus an average C score of 50% from 2010 to 2019; the quarterly trend is stable after a brief move to C+ at the end of 2025 and early 2026.
• Employment weakened in September, with low nonfarm payroll growth and downward revisions, while unemployment was 4.17% as the labor-force participation rate continued to decline.
• Real consumer spending accelerated to a 3.2% annualized pace in the revised second-quarter GDP data from 0.5% in the first quarter, supported by earlier fiscal stimulus and wealth gains among higher-income households.
• Real disposable income grew only 0.5% year over year, while the savings rate fell from 5% at the end of 2025 to 4.1% in August; higher energy prices are expected to further erode real income.
• Household credit grew 2.75% year over year, leverage and debt-service costs remained low by historical standards, and net worth stayed near an all-time high, although gains were concentrated among wealthier households.
• Consumer sentiment deteriorated in the third quarter, lower-income households increasingly used personal loans and buy-now-pay-later products for everyday purchases, and subprime auto performance weakened despite broadly stable delinquencies.

Takeaway: Western Asset favors high-quality consumer credit and housing-related consumer sectors, prefers positions higher in the capital structure, and remains cautious on subprime consumer assets as oil prices, interest rates and weaker purchasing power pressure spending.