Consumer spending accounts for roughly two-thirds of the U.S. economy. For now, it is still growing. But the cracks are widening.
Retail sales fell 0.2% in January, following a flat December. That is a two-month run without positive growth in the economy’s main engine.
The personal saving rate jumped to 4.5% in January, up half a percentage point from December. Americans are beginning to pull money back.
Credit card balances expanded to $1.15 trillion in Q4 2025, up $39 billion year-over-year. Delinquency rates are rising across all income groups.
“Cracks beneath the surface, such as rising delinquencies and slowing job growth, could compound the effects on an already stressed consumer,” said one analyst at Morgan Stanley.
The labour market is the most concrete warning signal. Employers cut 92,000 jobs in February. The economy has added fewer than 10,000 jobs per month on average since January 2025.
That hiring pace is the weakest outside of official recession years since 2002. Yet unemployment, at 4.4%, has not yet crossed the threshold most recession models require.
The University of Michigan’s consumer sentiment survey fell close to all-time lows in November before a modest rebound. The Iran conflict has renewed the downward pressure.
Small businesses are broadly pessimistic. The Federal Reserve’s Small Business Credit Survey found that the share expecting revenue growth dropped to its lowest level since 2020 last year.
The split between income groups is stark. Wealthy Americans, buoyed by strong asset prices, are still spending freely. Lower and middle-income households are pulling back sharply.
“The economy is literally moving at two speeds,” said one market strategist, “with businesses and affluent households stimulating growth while the average person is increasingly anxious and financially exhausted.”
Tariffs are the slow-moving threat that most forecasters expect to land fully in Q2 and Q3. Pre-tariff inventory stockpiles are running out. Price hikes are being planned.
The Yale Budget Lab estimates the current tariff regime represents a loss of roughly $570 per household per year at current rates. If extended, that figure rises to $940.
History suggests that when consumer resilience finally breaks, it breaks fast. The data does not yet confirm a break. But it is no longer ruling one out.