U.S., Goldman Sachs raises red alert: “Worst confidence in decades.” The middle class slows, while young people (25-35) close their wallets.

“We are facing one of the worst levels of consumer confidence in decades.”

The almost apocalyptic sentence does not come from a permabear analyst or a political commentator, but directly from Carlos Abrams-Rivera , CEO of Kraft Heinz , during the earnings call .

These aren't just empty words to prepare the market for the worst. The food giant has drastically lowered its full-year sales guidance , now expecting a decline of between 3% and 3.5%. This is a substantial decline compared to previous expectations.

The reason given by management is a lethal mix that is hitting the American consumer: the persistent pressure of prices inflated by inflation and, crucially, cuts to “food stamp” programs (federal food aid), which have reduced the budgets available to families.

The market has already sensed this. Over the past two weeks, the non-essential consumer goods sector (the so-called “discretionary”) has performed disastrously, underperforming the S&P 500 Index by a full 500 basis points (5%) .

But the most structural warning, the one that defines the contours of a true middle-class crisis, comes from Goldman Sachs, which has issued an unequivocal “Red” warning on the health of American consumers.

Goldman's Warning: The Contagion Reaches the Middle Class

The epicenter of the analysis is a report dated November 1st , authored by Scott Feiler , a consumer goods expert at Goldman Sachs. Feiler writes that the conversation about consumer health is "fundamentally changing."

Until a few weeks ago, the script was different: if a company reported weak data, the blame was placed on specific factors (individual business problems, weather impacts) or, at most, the weakness was confined to low-income groups.

This is no longer the case. The contagion is evident and spreading.

Feiler identifies three key changes that raised the alarm:

1. More companies are reporting a slowdown: These are no longer isolated cases, but a widespread trend.
2. The weakness has spread to the middle class: This is the crux. It's no longer just the poor who are being cut, but also people considered moderately well-off.
3. Focus on the 25-35 age group: Companies specifically point to this demographic, once a spending powerhouse, as the ones now “ tightening their wallets .”

The stock market performance of the last two weeks, with the vertical collapses of many stocks, is only confirmation of this substantial change.

The "Mattanza" of quarterly earnings: who is affected by the crisis?

Rich Privorotsky, head of Goldman Sachs' Delta One division, emphasized how this divergence was evident in the latest earnings season. The retail ETF (XRT) collapsed to its mid-October lows, and the ones suffering are precisely the brands that built their fortunes on the middle class.

The quarterly data are a war bulletin:

• Chipotle (CHG): The popular Mexican burrito chain plunged 17% . The company was brutally honest: “The gap has widened. Middle- and low-income customers have reduced their consumption frequency.” Management cited pressures from unemployment, the rebound in student loan payments (a huge burden for millennials), and stagnant real wage growth.
  • The key fact: Chipotle has specified that its core customer base (under $100,000 in income, ages 25-34) is cutting back. And, mind you, they're not switching to competing restaurants: they're shifting their spending to supermarkets to save money.
• Fast-Casual Restaurants: It's not just Chipotle. Mediterranean chain CAVA fell 11%. Restaurant chain Sprinkles Foods reported third- and fourth-quarter results that were significantly below expectations, emphasizing the impact on middle-income and younger consumers.
• Retail: Weakness is widespread. Home goods retailer SG fell 9.6%, while healthy supermarket chain SFM (Sprouts Farmers Market) plummeted 26% .
• Even the "Defensive" Suffer: Not even traditionally "safe" sectors like snacks are immune. Dirk Van De Put, CEO of Mondelez International (maker of Oreos), warned: "A possible government shutdown will certainly not help consumer confidence."
  • Hershey's (chocolate) confirmed the trend, admitting it had to launch promotions and discounts before Halloween. This is a very negative sign , justified by the fact that "American consumers are holding back on spending due to economic uncertainty and rising cocoa prices."

Repairs, not purchases: the postponement of major purchases

The weakness, as Goldman Sachs notes, is mainly manifested in the postponement of large purchases .

Auto parts giant O'Reilly said it experienced "moderate pressure on do- it-yourself (DIY) transaction volumes" starting in the middle of the third quarter. This is a short-term reaction from consumers who, faced with rising prices, are also cutting back on maintenance, although it may be due to the bankruptcy of Best Brands.

The signal from Camping World (RV and camper dealer) is even clearer. The company confirmed that "consumer resistance" due to prices, labor market uncertainty, and inflation continues, with new camper sales still declining year-over-year. Maintenance spending, however, remains high : a clear sign that people are repairing the old, not buying the new.

Even traditional restaurants are sending out smoke signals. The Cheesecake Factory chain emphasized: "There was some volatility in September, but a bigger change occurred in October." Management even pulled out old data from the last government shutdown (2019), when the sector suffered a monthly decline of 1-2%.

The “K-Shaped” Economy: Luxury Resists, Value Thrives

This consumer crisis, however, isn't affecting everyone. And here the true nature of the post-pandemic economy emerges: a "K-Shaped" recovery , where spending trajectories diverge dramatically.

While the middle and lower-middle class sinks (the lower arm of the K), the high-end and, paradoxically, the “value” (low-price) are not only resisting, but thriving (the upper arm of the K).

Who's at the top (High-End):

• Apple: Apple's strong holiday outlook, cited by Goldman's Privorotsky, highlights the strength of high-end consumer spending.
• Visa: The payments giant described a "broad and strong performance" in its report. Both essential and discretionary spending increased compared to Q3. And the most important finding: "The highest spending category continues to grow fastest."
• Luxury Travel: While Booking Holdings (online travel) noted a slight decline in average daily rates and number of nights (a sign of caution), Royal Caribbean (cruises) disappointed on its net profit estimates, but high-end demand remains strong, while mid-range demand is weakening.

Who is at the bottom (Value):

• Starbucks: The coffee chain saw transaction volume return to positive territory in September, with strong performances on college campuses, capturing small but frequent spending patterns.
• Chili's (Brinker International): This is perhaps the most emblematic case in point. The casual dining restaurant chain stated, "Chili's continues to see sales growth among families of all income levels." But here's the thing: "While other companies in the industry see low-income families cutting back on spending, we're seeing the exact opposite… our fastest-growing group is actually families with an annual income of less than $60,000 ."

The final picture is merciless. Luxury (Apple, Visa) and premium services are thriving. Value brands (Chili's) are capturing customers fleeing the mid-market. Those who are disappearing are the mid-market, because those who used to buy in that sector are cutting back on spending. This is the group that forms the basis of American consumption, eating at Chipotle, buying from SFM, and dreaming of a camper from Camping World. Goldman Sachs's red alert isn't a prediction; it's the chronicle of a slowdown already underway, which, if it continues, will also impact consumption at the macro level .

Questions and Answers

Why did US consumer confidence drop so sharply?

Confidence is at an all-time low due to a "perfect storm": persistent inflation has eroded purchasing power for two years, the Federal Reserve's high interest rates are making mortgages and loans expensive, and government stimulus programs (such as food stamps ) have ended. Added to this is the resurgence of student loan payments, which is hitting the 25-35 age group hard. This combination is forcing families, especially the middle class, to cut non-essential expenses to meet daily costs.

Which sectors and age groups are most affected by this consumer crisis?

The hardest hit are non-essential consumer goods (discretionary) and fast-casual restaurants (such as Chipotle and CAVA), which cater to the middle class. The age group cutting spending the most is the 25- to 35-year-old group. There's also a sharp slowdown in the purchase of large-ticket durable goods, such as campers (Camping World) or DIY auto parts (O'Reilly), which are being postponed due to economic uncertainty and high interest rates.

Is the consumer crisis hitting all sectors equally?

Absolutely not. We're witnessing a severe polarization, known as the "K-shaped" economy. While the middle class is shrinking (causing companies like Chipotle to collapse), the upscale segment is showing resilience (as evidenced by Apple's results and Visa's spending data). At the same time, even brands perceived as "value" (low-cost), like the Chili's chain, are gaining customers, likely absorbing those who can no longer afford the middle segment.

The article USA, Goldman Sachs red alert: "Worst confidence in decades." The middle class slows down, young people (25-35) close their wallets comes from Scenari Economici .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/usa-allarme-rosso-goldman-sachs-peggior-fiducia-da-decenni-il-ceto-medio-frena-i-giovani-25-35-chiudono-i-portafogli/ on Tue, 04 Nov 2025 11:00:03 +0000.