Episode summary
Consumer Debt is Possible Headwind for Retail, Says EY-Parthenon's Auchincloss
Bloomberg Surveillance
· · 5 min · Guests: Will Auchincloss
Summary
Consumer spending is still holding up into the holiday season, but Will Auchincloss said the support is becoming more fragile as shoppers grow less confident and more price-sensitive. He pointed to weaker job expectations, persistent inflation in essentials like food and housing, and even debt as reasons consumers are tightening behavior while still trying to keep holiday baskets intact.
The retail numbers are being flattered by price increases rather than real volume. Auchincloss said holiday sales growth is running around 3% to 4% in some channels, but his firm’s outlook was for 2% to 3% year-over-year growth, with almost two-thirds of that coming from price rather than units. He also said channel switching is helping some retailers that have aligned better on value.
Restaurants and bars are seeing more pressure, especially higher-end dining, because consumers are cutting back on eating out first. Looking ahead to 2026, Auchincloss said the biggest risks are continued consumer caution, reliance on affluent households and asset prices, and rising use of debt and buy-now-pay-later, which could become a headwind if savings keep falling.
Key takeaways
- Will Auchincloss said consumer confidence is weakening because of the job outlook, inflation in essentials, and rising concern about debt.
- He said holiday retail sales are likely up about 2% to 3% year over year, but almost two-thirds of the gain is coming from price, not volume.
- Auchincloss said consumers are cutting back first on eating out, especially at higher-end restaurants, creating pressure on restaurants and QSR chains.
- He said a few retailers are benefiting from better value positioning and channel switching as shoppers hunt for lower prices.
- He warned that savings have declined and buy-now-pay-later use is rising, which could become a 2026 headwind if debt keeps building.
Notable quotes
“Consumers are showing in our monthly surveys that they're getting less and less confident in the economy as the year wears on”
“The biggest reason now, however, is inflation and the continued pressure on essential categories like food, housing, even debt now is sort of emerging as a topic for consumers”
“the majority of what we're seeing is that that those year over year gains are driven primarily by price actions and not volume”
“the first category consumers repeatedly tell us they're going to pull back on”
“we've gone from a savings economy to a debtor economy, and that shows up in the macro data”
How the episode opens
Consumers are showing in our monthly surveys that they're getting less and less confident in the economy as the year wears on. And there's several factors that are driving that. One is the job outlook.
The biggest reason now, however, is inflation and the continued pressure on essential categories like food, housing, even debt now is sort of emerging as a topic for consumers. And so they are trying to muscle through this environment as best as they can. And that is weighing on the retail sector.
And it's it's weighing a little bit on the holiday season as well. But we're seeing some pretty good numbers out of some of the retailers. I mean, I'm seeing, you know, probably three or 4% retail sales growth here in the holiday season with the e-commerce even higher than that.
It seems like consumers are still spending, though. They are, Paul, and they are trying to spend on the holiday and kind of keep that basket together as best they can. But there's some underlying factors that make the headline data a little bit more, more nuanced.
So the majority of what we're seeing is that that those year over year gains are driven primarily by price actions and not volume. And in fact, in our headline outlook for the for the holiday season, we sort of forecasted about a 2 to 3% year over year growth rate. I think it's coming in a little bit higher, which is good news.
But the majority of that is driven by price. Almost two thirds of that is driven by price and not volume. So, you know, as a retail sector, you like to see more volume going out the door historically.
And so again, it's a little bit softer. I think part of that is certain chains have really resonated with consumers this this holiday season.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- consumer sentiment
- consumer credit and affordability
- retail spending
- buy now pay later
- bnpl lending risks
Companies and tickers mentioned
- AFRM
- JPM
- C
- PYPL
- EY-Parthenon
- Affirm
- Block
- Klarna
- Empower
- JPMorgan Chase
- Citigroup
- PayPal
Watch the episode
Watch “Consumer Debt is Possible Headwind for Retail, Says EY-Parthenon's Auchincloss” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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