The Doomsayers have long warned about one specific vulnerability of the US economy, i.e., the sustainability of consumer spending growth. Since July 2024, real consumer spending has outpaced real disposable income growth on a y/y basis for 22 consecutive months. Spending is up 4.1% over that period, while disposable income rose just 1.1%. The widening gap has been filled by declining personal savings. The personal savings rate fell from 5.3% in July 2024 to 2.6% in April 2026, its lowest reading since June 2022.
We understand why this seems alarming. Yet while the Naysayers have been sounding this alarm for some time, the latest Redbook same-store retail sales index (excluding food services, gasoline, and autos) is up 9.1% y/y for the week ending June 5, far above the 2025 full-year average of 5.8%. Consumer spending continues to grow at a solid pace.
Unlike the depressing K-Shaped Economy story promoted by the pessimists, our G-Shaped Economy hypothesis explains why consumer spending should continue to grow. We are focusing on the generational age profile of consumers. The sizeable Baby Boomer cohort is retiring. They are no longer earning wages and salaries, nor are they saving for retirement. But they are continuing to spend their record net worth on themselves. They are also providing some financial support to their younger relatives.
That's been our narrative for quite some time. We recently found some additional Census data to support it:
