Consumer resilience
Consumer resilience sparked by alternative income sources is gaining traction in the current economic landscape. Per the full note from UBS GWM, diminishing savings rates are offsetting the lagging real wage growth, with overall U.S. civilian wages growing only 3.1% year-on-year against a consumer price inflation rate of 3.7%. This dynamic reveals a shift in consumer behavior, as an increasing reliance on side incomes—such as the burgeoning market for second-hand goods—bolsters spending power in an environment of rising costs. Ahead of future economic data releases, the implications for currencies sensitive to U.S. consumer activity could be significant.
What the desk is arguing
The desk argues that changing consumer behavior, specifically a reduction in savings to maintain spending amidst weak wage growth, indicates underlying resilience in the economy. Per UBS GWM, the growth of alternative income streams, particularly in the gig economy, is playing an important role in preserving consumer purchasing power despite inflationary pressures.
Evidence from the UBS report highlights that U.S. civilian wages have risen by only 3.1% year-over-year, while inflation continues to outpace this increase. Additionally, the growing importance of non-traditional income sources, such as side hustles and self-employment, has led to a notable shift in the composition of household income.
This perspective challenges the more traditional view that wage growth directly correlates with consumer spending capabilities. With a significant portion of household income now derived from sources other than wages, we see an evolving economic landscape where spending power can remain robust even in the face of stagnant wage increases.
Where it sits in our coverage
Our consensus target for USD/EUR stands at 1.075, with a range from 1.04 to 1.12, reflecting differing views among major firms: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's outlook aligns closely with jpmorgan, suggesting a stronger dollar performance against the euro, while holding a contrast to bofa, which anticipates a decline in USD strength. Given the current discourse surrounding consumer resilience, this view remains within the upper bounds of the projected spread, indicating a bullish sentiment.
How other firms see it
Aligned firms such as jpmorgan and citi express optimism regarding USD strength due to resilient consumer behavior, while bofa advocates for a more cautious outlook, citing potential headwinds from continued inflationary pressures. The forthcoming consumer confidence indices and retail sales data are critical indicators to monitor, as they intersect directly with this thesis of consumer adaptability in a challenging economic environment.
What the calendar says
With no major economic events on the near horizon, traders should focus on upcoming domestic consumer sentiment indicators that could reflect shifts in spending behavior driven by current wage and cost dynamics. Attention to the broader implications of U.S. economic conditions will guide positioning toward currency pairs sensitive to consumer trends.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Consumer resilience is increasingly driven by alternative income sources.
- 02Wage growth in the U.S. continues to lag behind inflation, impacting savings.
- 03The shift in household income composition alters traditional spending power dynamics.
- 04Monitoring consumer sentiment and spending behavior is essential for upcoming trades.
Market implications
Watch for potential strengthening in USD given the renewed consumer resilience narrative, particularly if subsequent economic data reflects increased spending activity. Key levels to watch include the consensus target of 1.075 for USD/EUR, as it indicates market sentiment.
Risks to this view
Any unforeseen economic shocks, such as a rapid deterioration in consumer sentiment or unexpected inflation spikes, could rapidly alter spending patterns and invalidate the current bullish outlook for the USD.
Consumers cut savings to offset weak real wage growth. But the rise of alternative income sources may play a role in consumer resilience. View this email in a web browser Consumer resilience UBS Weekly Blog by Paul Donovan As the Gulf war drags on, wage growth is struggling to match the pace of inflation.
US civilian wages rose 3.1% y/y in the third quarter. Consumer prices are currently rising by 3.7%. European wages are growing faster than inflation, but not by much.
Consumers have reduced how much they save each month to help cover higher prices. However, alternative income streams have been growing in importance. In 2025, the used clothing website Vinted sold EUR 10.8bn of second-hand goods.
That is the same as what Belgians spent on clothing last year. Income from such side hustles add to consumers’ spending power and are a mitigating factor that labor market data overlooks. Aging populations also change the importance of wage growth.
In the US, the contribution of paid employment to household income fell below 60%—the only time it has done so, aside from the pandemic. Pension income is more significant. The rise of self-employment means that proprietors’ profits, rather than wages, play a larger role in supporting spending power.
The resilience of consumer spending in the face of rising prices owes much to changing savings behavior. But some of the resilience comes from the fact that wages matter less than they used to as a driver of spending power. Read more 〉 Read important disclaimer 〉 Recommended content Nobel Perspectives - Exploring the questions that shape our world 〉 Women in Economics – Explore the work of influential thinkers 〉 You have received this email because you registered at .
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