Retailers Warn Consumer Spending Cushion Is Dwindling Amid Price Hikes
US retailers say tax refunds averaging nearly $3.5K per return have supported consumer spending through spring 2026.
The refunds stem from sweeping tax cuts in Trump's One Big Beautiful Bill Act, which became law in July 2025.
WalmartWMT and TargetTGT both cited refund-driven sales in recent earnings calls.
Lowe'sLOW CFO Brandon Sink still expects refund-fueled demand in June, with some customers having held funds back "given the uncertainty."
Advance Auto Parts'AAP CEO Shane O'Kelly said sales were likely to slow as his company transitions "beyond the recent tax refund tailwinds."
Fuel prices have risen 50% since Iran choked off oil shipments through the Strait of Hormuz, through which a fifth of global crude supply flows.
Card spending on gasoline rose roughly 40% year-over-year in recent weeks, per data tracking 4M US households.
"Gas prices remain elevated and that pressure is real for families," said Bob Eddy, CEO of warehouse retailer BJ's Wholesale ClubBJ.
Grocery prices rose 2.9% in April as elevated diesel costs made transporting goods more expensive, with fruit and vegetables up 6.1%.
Gregory Daco, chief economist at EY Parthenon, said the refunds "have been largely erased by the increase in Middle East price pressures."
Who Bears the Burden
Bank of America estimates the top third of earners received roughly a 13% increase in tax rebates.
The bottom third saw roughly a 6% increase, per the same data.
Retail sales grew 4.9% year-over-year in April. But much of that gain was driven by wealthier Americans who spend a smaller share of income on fuel.
Wage growth has also been losing ground to inflation since mid-2025, according to Nathan Sheets, global chief economist at Citigroup.
Consumer sentiment has fallen to record lows on the University of Michigan index. 57% of surveyed consumers said high prices are eroding their personal finances, up from 50% the prior month.
Delinquencies on credit cards, auto loans, and student loans have all risen, per Federal Reserve Bank of New York data.
Walmart's CFO John David Rainey acknowledged that while wealthier customers were "spending with confidence," lower-income shoppers were "more budget conscious."
Oxford Economics chief US economist Michael Pearce described the expected pullback as a "speed bump" for US growth. He said it dims what had otherwise looked like a strong year for the economy.
Refunds are spent and fuel costs are absorbing a growing share of household budgets. The consumer resilience that drove US growth since 2020 faces its clearest test yet.