{"id":12170,"date":"2026-06-24T14:26:48","date_gmt":"2026-06-24T14:26:48","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=12170"},"modified":"2026-06-24T14:26:50","modified_gmt":"2026-06-24T14:26:50","slug":"june-monthly-exec-briefing-us-consumer-bruised-by-persistent-inflation","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/us-analysis\/us-featured-analysis\/june-monthly-exec-briefing-us-consumer-bruised-by-persistent-inflation\/","title":{"rendered":"June Monthly Exec Briefing: US consumer bruised by persistent inflation"},"content":{"rendered":"\n
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We\u2019ve been consistent: One shouldn\u2019t bet against the US economy<\/a>. Primarily, that means the consumer\u2014who accounts for nearly two-thirds of US GDP.<\/p>\n\n\n\n

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.<\/p>\n<\/div>\n<\/div>\n\n\n\n

Now, as energy costs decline, it\u2019s tempting to think consumer spending can accelerate. But that might be too optimistic a take. Despite headline resilience, the energy shock, coupled with persistent non-energy prices, have weakened the US consumer and their capacity to absorb further price pressures.<\/p>\n\n\n\n

That\u2019s not enough to break our cautiously optimistic U.S. narrative. The K-shape and ultra-resilient high income consumer is still in play, so too is a tight labor market that will keep Americans employed.<\/p>\n\n\n\n

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\u2019s a shift worth monitoring.    <\/p>\n\n\n\n

Non-energy inflationary pressures remain in the system<\/h4>\n\n\n\n

At around US$75\/barrel for West Texas Intermediate oil, energy will continue to put upward pressure on year-over-year headline inflation in until February 2027\u2014meaning we expect another nine months of \u201cugly\u201d headline inflation data.<\/p>\n\n\n\n

It will be easy to \u201clook through\u201d the pressure over that horizon as backward looking, telling us more about an energy shock from the past (hopefully) than what\u2019s in the future. It will, however, be much harder to look through the rest of the inflation picture, particularly as consumer prices have run above the Federal Reserve\u2019s 2% target for well over five years\u2014a trend new Federal Reserve Chair Kevin Warsh<\/a> has expressed particular concern over.<\/p>\n\n\n\n

Our concerns about inflation haven\u2019t been confined to energy, but the broad-based nature of  U.S. inflationary pressures that have persisted over a multi-year horizon. Goods inflation has risen off the back of tariffs, there are no signs of deflationary pressure coming from a tight housing market, and there is a floor under how far services ex-housing inflation can decline as the labor market stays tight. Just look at super core (core services ex-shelter) running at 3.5% year-over-year.<\/p>\n\n\n\n

While the \u201cpeak\u201d in headline inflation is likely behind us, we aren\u2019t convinced that\u2019s the case for non-energy inflation. In particular, there are signs that businesses aren\u2019t done passing their higher input costs through to consumers. Producer prices are, for example, re-accelerating to a sizeable of 6.5% YoY, core producer prices are at 4.9% and core finished consumer goods (i.e. ex-food and energy) +3.5% YoY. <\/p>\n\n\n\n

Moving forward, supply chain disruptions are likely to push food prices higher, and that\u2019s a basket that no consumer can substitute away from.<\/p>\n\n\n\n

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Eroded buffers for consumers\u2026<\/h4>\n\n\n\n

There\u2019s no doubt that falling energy prices remove a significant consumer headwind. Problematically, however, the past four months of surging energy prices combined with ongoing non-energy inflation have meaningfully contributed to the erosion of financial buffers of the past six years, notably for low-and mid-income Americans. This group is now ill poised to absorb new shocks; particularly, additional price shocks should they appear (e.g. another surge in energy prices or new tariffs).   <\/p>\n\n\n\n

To be sure, signs of stress are building for most consumers:<\/p>\n\n\n\n