UBS Sees Consumer Spending Holding Up

American consumers still have some fight left, but UBS warns that the economy faces a narrowing path as labor market uncertainty hangs over the outlook.

Abigail Watt of UBS said the current economic environment may still support higher prices, with consumer spending expected to remain somewhat stronger in the second quarter. That resilience, however, does not stand on solid ground. Watt pointed to a key tension: rising gasoline prices could eat into household budgets just as tax refunds provide a temporary lift.

The second quarter may hold up, but the outlook depends on whether tax refunds can offset the drag from higher gasoline prices.

That balance matters because consumer spending continues to drive the broader economy. If households keep opening their wallets, businesses may find room to maintain pricing power even as uncertainty builds in the labor market. If fuel costs climb faster than refunds can cushion the blow, that support could weaken quickly, especially for lower- and middle-income consumers who feel price increases first.

The bigger message from UBS is not that demand has cracked, but that it now depends more heavily on short-term forces. Reports indicate the market still watches whether consumers can absorb higher costs without pulling back. That makes routine indicators like fuel prices and refund-driven spending more important than usual in shaping the near-term picture.

What happens next will turn on how long consumer resilience lasts and whether labor market concerns deepen. If spending stays firm, the economy may continue to tolerate higher prices for a while longer. If those supports fade, the pressure could show up fast in retail activity, inflation trends, and the broader business outlook.