United States: Resilience tested by inflation – RBC

Royal Bank of Canada (RBC) strategists argue that while the United States (US) consumer has remained resilient in 2026, persistent inflation and the earlier energy price shock have eroded households’ ability to absorb further price increases. They maintain a cautiously optimistic view on the US economy, highlighting strong high-income demand and a tight labor market, but warn that corporate pricing power may now be weakening.

Inflation pressures strain household resilience

"We’ve been consistent: One shouldn’t bet against the US economy."

"The consumer has held up well since the start of the year even as energy costs surged, buffered by a long list of shock absorbers: Tax refunds, plentiful savings, and manageable debt loads."

"Now, as energy costs decline, it’s tempting to think consumer spending can accelerate."

"Despite headline resilience, the energy shock, coupled with persistent non-energy inflation, have weakened the US consumer and their capacity to absorb further price pressures."

"But, businesses may increasingly find their ability to pass prices through to end consumers is eroding for the first time after the pandemic, and that’s a shift worth monitoring."

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