Goldman Sachs concluded that recent corporate results and sturdier-than-expected consumer outlays point to a U.S. economy that is holding up, but the investment bank flagged several emerging constraints that could slow activity as the year progresses.
Across corporate America, first-quarter earnings broadly outperformed expectations for much of the S&P 500. On a real basis and excluding energy, revenue grew 6.3% year-over-year - the fastest pace since 2021 - while earnings rose 26% from a year earlier. Those figures underpinned the assessment that profits and top-line performance remain a source of support for the broader economy.
Consumer-facing firms also described demand that has proved more resilient than many had anticipated amid higher energy costs and geopolitical uncertainty. Companies reported only limited signs of weakness, noting improvement in sales trends within both consumer discretionary and consumer staples categories.
Despite that resilience, Goldman Sachs expects household demand to lose momentum in the second half of the year. The bank cited several forces that it expects to restrain spending: low household savings rates, weak real disposable income growth, a diminishing boost from tax refunds, and ongoing inflationary pressures. The report emphasized that rising gasoline prices could further squeeze budgets, with the effects likely felt most acutely by lower-income households.
On corporate margins, management teams increasingly flagged higher costs. During recent earnings calls, companies across sectors pointed to rising expenses tied to oil, shipping and transportation, resin-based materials, and computer memory. Those cost pressures have already led analysts to reduce margin expectations in multiple sectors, signaling narrower profit cushions ahead.
Meanwhile, artificial intelligence remains a primary focus for business investment. Nearly two-thirds of S&P 500 management teams referenced AI during earnings season, and firms are accelerating spending on data centers, cloud infrastructure, and advanced computing capabilities. Capital expenditure projections for hyperscale technology companies were revised up, with spending now expected to top $750 billion in 2026 as demand for AI infrastructure and computing capacity grows.
The near-term labor impact from AI and automation appears limited so far. Although some firms have announced layoffs connected to automation initiatives, demand for technical talent - including hardware engineers, systems engineers, and research professionals - remains robust. That hiring has, in many cases, offset reductions in support and administrative roles.
Goldman Sachs noted that the combination of healthy earnings growth and continued business investment supports the economy in the near term. At the same time, the bank warned that moderating consumer spending and rising input costs are likely to create headwinds for companies as they navigate the remainder of 2026.
Summary: Strong corporate results and firm consumer spending underpin a still-resilient economic picture, but a confluence of weaker household financial buffers and rising costs could impede growth later in the year. Firms are increasing investments tied to AI, even as some cost categories and wage dynamics compress margins.