ISTANBUL

The resilience of US consumers is expected to extend into 2026, supported by strong household balance sheets and continued, albeit slowing, growth in disposable income, international credit rating agency Fitch Ratings said late Wednesday.

In a statement, Fitch noted that consumer spending increased by 0.6% in the first quarter of last year, rose 2.6% in the second quarter, and climbed 3.5% year-on-year in the third quarter.

Household nominal disposable income grew 4.4% year-on-year in the final quarter of last year, driven by moderate employment gains and steady nominal wage growth, the agency said.

However, Fitch noted that real disposable income growth slowed to 1.6% year-on-year in December 2025, down from 2.8% in 2024, partly reflecting a softening labor market.

“Nominal wage gains for higher-income households are now outpacing those for lower-income households, reinforcing the K-shaped narrative -- especially as inflation hits lower-income households harder,” Fitch said.

Consumers' net worth hits record high

Fitch said US consumers’ net worth rose 3.5% year-on-year in the third quarter of last year, supported by continued strength in equity markets, reaching a record high and providing a positive boost to consumer spending.

Household debt-service burdens remained broadly unchanged in the second quarter of 2025 at 11.3% of disposable income, Fitch said, staying below the pre-pandemic level of 11.7%.

Fitch expects 2 rate cuts in 2026

Olu Sonola, head of US economic research at Fitch Ratings, said the Federal Reserve will continue to closely monitor labor market conditions but is expected to cut interest rates twice in 2026.

The outlook is consistent with inflation remaining above 3%, he said.

“Fitch projects consumption growth to average 2.1% in 2025 and ease to 1.7% in 2026," he said.