Morgan Stanley analysts, including Michael Gapen and Sam Coffin, see stronger consumer spending momentum in recent U.S. data. They revised their 2026 outlook for the world's largest economy toward stronger growth and a lower unemployment rate. This positive shift comes after retail sales beat expectations in November, rebounding from a prior contraction.

The bank maintains its view that some disinflation will prompt the Federal Reserve to cut interest rates in the second half of 2026. Supporting their case, initial jobless claims fell below 200,000 for the first time in seven weeks, signaling a resilient labor market. Meanwhile, core CPI data showed slight easing, though headline inflation held steady.

Consumer spending is the primary engine of the U.S. economy, typically driving about two-thirds of total output. Analysts have been watching for signs of strain from rising living costs, especially among lower-income households. With these indicators, Morgan Stanley calls this "about as good an outlook as we could ask for," setting the stage for a potential soft landing.