Household Spending Starts 2026 on a Softer Note

• Risk appetite softened overnight as the Middle East conflict moved into its sixth day, with little sign that tensions are close to easing.
• A prolonged disruption raises the prospect of renewed inflation pressure through higher energy prices. That theme has continued to filter into rates markets, with US Treasuries extending their recent sell-off as expectations for Fed easing are pared back. The US 10-year yield rose around 6bps to 4.14%.
• Domestically, household spending rose 0.3% m/m in January, recovering from December’s revised 0.5% decline.
• On an annual basis, spending growth was 4.6%, though revisions to earlier data meant the yearly figure came in weaker than previously expected.
• When viewed next to the softer consumption outcome in the GDP figures, the early read for 2026 suggests household demand is beginning the year with less momentum than many had expected.