Rating agency Barclays on Thursday said the benchmark S&P 500 index has “limited upside potential” as U.S. consumer spending declines and income growth slows, lowering its 2022 growth targets for the index and earnings per share, Business Insider writes.

The S&P 500 growth forecast was cut from 4,800 to 4,500 points and the EPS target was lowered from $235 to $223. On Thursday, the S&P 500 index was around 4477 points

The agency forecast the downturn because consumers are cutting back on spending on goods and services as the COVID-19 pandemic wanes and oil prices rise.

“We believe corporate earnings in the S&P 500 will face greater challenges in 2022 than currently expected,” Barclays, led by Jonathan Millar and Manish Deshpande, said in a research note.

Consensus expectations for sales and earnings per share for companies in the S&P 500 index rise strongly through 2022, despite margin contraction in the fourth quarter of 2021, slowing growth for companies exceeding earnings expectations, and stabilizing commodity consumption.

“Our new baseline scenario envisions commodity consumption returning to normal within about 2 years and EPS growth slowing by 11% in FY22,” Barclays said.

Earlier, commodity spending was expected to return to normal over the next 5 years.

Strong merchandise consumption has been a key driver of the benchmark index’s earnings growth over the past 2 years, it said. The closure of stores due to COVID-19 has led people to change certain services with goods, for example, from eating out in restaurants to cooking at home, while the closure of gyms has led to increased sales of home exercise equipment. The organization of remote work also required purchases of home office supplies and office equipment. Cumulative excess spending on goods reached $2 trillion.

Today, however, the trend is reversed: spending on goods is likely to slow as the COVID-19 pandemic wanes and tax incentives that helped households are exhausted. Rising oil prices are putting additional pressure on goods spending as consumers are forced to adjust their budgets to higher gas and energy prices while cutting spending in other areas.