Goldman Sachs warns of consumer spending slowdown as tax refund boost fades

Goldman Sachs economists have warned of an impending slowdown in consumer spending as the boost from tax refunds begins to fade. Despite high gas and food prices, US consumers have shown remarkable resilience this year, with sales among consumer-facing companies rising at a healthy pace in the second quarter. However, Goldman Sachs economist Jan Hatzius expects this strong consumer spending growth to slow in the second half of the year as real cash flow stagnates.

The strength in consumer spending was broad-based, with same-store sales accelerating for companies serving both lower- and higher-income consumers. Real consumer spending growth is now expected to slow to 1-1.5% in the second half of the year, down from the 3.2% annualized pace seen in the first quarter. This slowdown will be tested this week with earnings and outlooks from companies like Home Depot, Lowe's, Walmart, and Target, with Walmart likely to be most closely watched due to its outlook for the third quarter.