Macroeconomic Overview: Consumer spending continues to support U.S. GDP growth. In August, the latest month with government data available, real consumer spending was 2.6% higher year-over-year. This is above the longer-term average (2.2% since 2008) and above the average in 2026 (2.3%). Above-average growth is notable given that consumer confidence has fallen to the lowest level in more than a decade, consumers are grappling with inflation, and real wage growth is under pressure.
With these challenges, several explanations have been suggested for why consumer spending has remained robust. One of them is the wealth effect. The median home price and the stock market continue to hover near record highs. For consumers who own these assets, wealth has risen, and that can create comfort around spending.
Another development that may be enabling spending is a decline in the savings rate. Since early 2024, the personal savings rate has fallen from a recent peak of 7.2% (January 2024) to 4.1% (August). In 2022, when inflation surged after COVID-related stimulus, the savings rate dipped below 4.0% for several months. Excluding 2022, the current level for the savings rate is the lowest since the period that preceded the financial crisis (2006-08).
Not all U.S. households own homes or stocks and there is a limit to how low savings rates can go. This may raise concerns about the ability of consumers to maintain above-average spending growth. Nonetheless, spending growth for clothing has been stronger than the overall rate. Even though apparel can include discretionary items, the annual rate of spending growth on clothing has outpaced the rate of overall spending.
Employment: The U.S. economy is estimated to have added 29,000 jobs in September. This was significantly lower than the 162,000 job gain initially reported for August. Revisions for the previous two months were negative. The figure for July decreased 31,000, bringing the current estimate to a loss of 10,000 jobs. The figure for August decreased 29,000, from 162,000 to 133,000. The current 12-month average for job gains is near 41,000 (October 2025-September 2026).
There was a marginal month-over-month increase in the unemployment rate, which rose from 4.1% to 4.2%. Despite the slowdown in hiring, the unemployment rate remains at historically low levels. Excluding the volatile period around COVID, the rate has been below five percent since 2016, representing the longest stretch below 5% since records began in the late 1940s.
Wages increased 3.0% year-over-year in September. The latest reading extended the downtrend that has been in place since early 2022. Excluding the volatile period around COVID, wage growth in September was the lowest since December 2019. In every month since April, the inflation rate has been higher than wage growth. This suggests persistent pressure on real earnings that could eventually affect consumer spending.
Consumer Confidence & Spending: After a series of minor monthly changes, the Conference Board’s Index of Consumer Confidence® posted its largest move in 16 months in September (-6.7 points to 81.9). This is the lowest reading since 2014. One reason consumer confidence is tracked is its potential association with consumer spending. Index values have followed a general downtrend since 2018. Over the same period, there have been sustained increases in spending, but lower confidence and pressure on real earnings have raised concerns about consumers’ willingness and ability to maintain spending growth.
After relatively flat growth in July (+0.1%), overall consumer spending, adjusted for inflation, increased 0.6% month-over-month in August. Year-over-year, overall spending was up 2.6%, which is above the average over the past twelve months (2.3%).
Inflation-adjusted spending on garments was up 1.3% month-over-month in August. This is the strongest rate of monthly growth in two and a half years (since December 2023). Year-over-year, apparel spending was 3.9% higher. This growth rate is nearly double the multi-decade average and builds on the strong growth posted a year ago. In August 2025, the year-over-year rate of growth in apparel spending was 8.7%.
Consumer Prices & Import Data: After two months of decreases (-0.6% in June and a marginal -0.03% in July), the CPI for apparel increased slightly month-over-month in August (0.1%). Year-over-year, it was up 3.7%, a strong rate of change relative to the average over the past couple of decades. Recent levels for the CPI are the highest since 1999. From early 2024 through the third quarter of 2025, year-over-year increases in retail clothing prices averaged 0.8%. Since February, the average annual rate of increase has risen to 3.9%.
The average cost per square meter equivalent (SME) of cotton-dominant apparel increased month-over-month in August (from $3.71/SME to $3.77/SME, seasonally-adjusted). In seasonally-adjusted terms, prices have generally remained near these levels since late 2023. However, these import costs do not include tariffs. For most locations, tariffs are 10-12.5 percentage points higher than they were in 2024.