Financial leaders building 2027 plans face a familiar puzzle. Consumer sentiment surveys point one way, and spending data points another. Which signal should shape the forecast?
Michelle Meyer, Chief Economist at the Mastercard Economics Institute, took on that question in the Day 1 keynote of the Corporate Financial Reporting Insights (CFRI) Conference. Drawing on Mastercard’s proprietary transaction data, she described “an economy that is proving to be exceptionally dynamic,” one that continues to innovate and adapt quickly in the face of repeated shocks.
Spending Holds Up as the Mix Shifts
Total personal consumption expenditures are up 5.8% year to date, ahead of the pace in both 2025 and 2024. Higher prices explain part of that strength. Spending on gasoline is up 18.5% and air transportation is up 13% in nominal terms.
Adjusted for prices, the picture changes. Gasoline volume is slightly negative and air travel is down 1.6%, which shows consumers driving less while still prioritizing travel and experiences. Grocery and everyday items are the softest categories, as households trade down and search for value.
Mastercard SpendingPulse shows retail sales excluding autos up 9.4% year over year. That momentum carried into third-quarter GDP, which grew 3.4%. For the holiday season, the Mastercard Economics Institute forecasts 5.5% growth in sales, the strongest since 2022, with a more even split between price and volume than in that inflation-driven year.
Why Consumers Keep Spending
Meyer pointed to three supports. The first is the labor market: 165,000 jobs added in October, a 4.1% unemployment rate and 1.06 job openings for every unemployed person as of September. Wage growth is running just under 4%, roughly keeping pace with inflation.
The second is household wealth. Gains have been concentrated among higher-income households, and they extend across the income spectrum. The third is debt. Credit card balances per capita are growing at under 3% a year, and the share of income needed to service debt remains near its lowest levels in decades outside the pandemic.
That combination explains what Meyer called “a real disconnect between consumer sentiment and consumer spending.” Consumers remember the price-level shock of recent years, with energy prices now 57% higher than before the pandemic. Their spending, however, follows jobs, income and balance sheets. Asked in the Q&A whether the economy has become K-shaped, she noted that spending, wage growth and job creation are occurring across income groups. “So I don’t think it’s K-shaped,” she said.
Inflation, Rates and Tariffs: What to Watch
The Consumer Price Index is running at about 3.9%, with energy the main contributor. Outside energy, inflation looks to be softening. Meyer flagged diesel as a risk to watch, since sustained high prices raise input costs for retailers and wholesalers that may eventually pass through to consumers.
The Mastercard Economics Institute expects the Federal Reserve to raise rates by 25 basis points in December and another 25 basis points in the first quarter of 2027, then hold unless inflation proves sticky.
On trade, Meyer noted that the average effective tariff rate excluding China rose from about 2% to just over 10% and now sits near 6%, following the Supreme Court ruling on tariffs imposed under the International Emergency Economic Powers Act. Tariffs on China have fallen from roughly 45% to 20%. The result is more pricing flexibility for importers and retailers this holiday season compared with last year.
AI: Investment Today, Productivity Ahead
Corporate profits are running at about 14% of GDP, funding real nonresidential fixed investment growth of 8% year over year. Equipment and intellectual property lead, and data center construction has offset weakness in offices and retail space.
Meyer also highlighted a surge in new business applications over the past 12 months, particularly in professional services and administrative support. She sees AI as a likely contributor, enabling faster business creation and drawing some workers into entrepreneurship. Mastercard data also shows AI power users spreading their spending across more merchants in discretionary categories, a shift in how consumers search for value.
Productivity growth now sits between its post-financial-crisis trend and the stronger trend of the late 1990s. The question for the next five years, Meyer said, is whether AI adoption drives a true breakout, and what that would mean for the labor market.
The 2027 Outlook
The Mastercard Economics Institute forecasts 2.4% real GDP growth for 2026, up from the 2.1% it projected after conflict in the Middle East disrupted energy markets. For 2027, it expects modest moderation as investment comparisons get tougher and higher rates weigh on capital spending.
Meyer’s watch list for financial leaders includes the balance of growth between consumption and investment, the potential for structurally higher energy prices and interest rates, continued realignment of trading relationships and cybersecurity risk as AI spreads through the economy. Above all, she recommended tracking the consumer. “If you understand the consumer, you get the economy,” she said.
Watch Meyer’s Keynote On Demand
Registration for CFRI 2026 remains open to FEI Members and Nonmembers. Registrants receive on demand access to Meyer’s keynote and the full conference program, along with the CPE-accredited replay, December 1–3, for up to 21 CPE credits.
The program also features keynotes from KPMG US Vice Chair of Audit and Assurance Christian Peo and SEC Chairman Paul Atkins, along with sessions on buy-side, sell-side and investor relations perspectives and updates from the SEC, FASB and PCAOB.
Register for CFRI 2026 »