What’s on Our Minds

Consumer spending should remain resilient because households have low leverage, strong employment and substantial wealth despite higher rates and energy costs.

• Through August, the average household had spent about $500 more on gasoline than a year earlier, equivalent to roughly $20 more per week since the Iran conflict began.
• Retail sales rose by an average of 0.7% per month in 2026, or 0.3% after inflation, indicating positive underlying consumption momentum.
• Household leverage remains historically low relative to both household assets and disposable income, so consumer demand is not being driven by borrowing.
• Unemployment remains near historical lows, meaning that nearly all Americans who want a job have one and that labor income continues to support consumption.
• Baby boomers are retiring with high wealth and low debt; because their spending is more sensitive to asset prices than labor markets, higher rates can increase their cash income as net savers.

Takeaway: The authors see higher gas costs and rates as manageable for most households, but the outlook still depends on employment and asset prices, and the pressures are not uniform across all consumers.