Fed: Consumption slowdown shapes outlook – DBS

DBS Group Research Chief Economist Taimur Baig, highlights signs of slowing US consumption after strong 2025 growth. He notes softer retail sales momentum in 4Q25 and a downgrade in real-time GDP estimates. Baig argues US household fundamentals remain solid and expects the Federal Reserve to deliver two 25bp rate cuts in 2H26 despite inflation staying above target.

US demand, GDP nowcast and Fed cuts

"The US is a consumption powerhouse, making up nearly 30% of global consumption despite comprising of only 4.2% of the world's population."

"Consumption growth for 2025 was impressive, but there are early signs of some slowdown, especially when looking at the data from 4Q 2025."

"The implication of this development is seen in real time GDP estimates."

"Consumption trend, placed in context, does not appear worrisome."

"We have penciled in two Fed rate cuts this year, one in 3Q and one in 4Q."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)