ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION
July 31, 2025 | Consumers Under Pressure Across The Spectrum
Danielle Park
As the US and Canadian central banks declined to offer monetary easing yesterday, consumer confidence measures are already below the levels recorded in the past nine recessions, including the periods surrounding 9/11, the 2008 financial crisis, and the 2020 pandemic.
A raft of recent data shows households under increasing financial stress across all income levels.
Year-to-date consumer spending data, combined with rising debt delinquencies, suggest the post-pandemic model of economic growth fueled by upper-income purchases of big-ticket items like cars, houses and vacations is coming under strain. See: Even top income earners are falling behind on credit card and car payments.
Spending in the first quarter was the weakest since the onset of the pandemic, and more recent monthly numbers indicated ongoing caution in discretionary categories like recreation services, air transportation and accommodations — all of which have registered outright declines this year.
Gucci owner Kering reported yesterday that Gucci sales were 25% lower year on year.
Procter & Gamble, a long-recognized bellwether for the health of the U.S. consumer economy, says consumers are delaying purchases and shopping less frequently. See, American shoppers are slowing down.
“We really see that the consumer is under some level of stress,” said CFO Schulten… Lower-income consumers are actively looking for price promotions and smaller pack sizes to manage their costs from paycheck to paycheck, while high-income consumers are scouring for deals, too.
“Both consumer segments are looking for value, but looking for value with their respective constraints,” said Schulten, who added that the company is observing the slowing demand in both the U.S. and Western Europe.
Delinquencies on credit card and auto loan debts from those making at least $150,000 annually have jumped almost 20% over the last two years, and faster than for middle- and lower-income borrowers (VantageScore data).
A recent Federal Reserve Bank of St. Louis study found the share of people making late card payments in the highest-income zip codes has risen twice as much over the last year as in the lowest-income ones.
Fifty-eight percent of Americans surveyed expect higher unemployment in the next twelve months, the highest since 2008, and a level only seen during past recessions. Those looking for incomes over 100k annually are reporting the least optimism on new job prospects since the pandemic (chart below since 2013).
Last year, a record of nearly 5.0% of workers in 401(k) plans took a hardship distribution for financial emergencies, up from a pre-pandemic average of about 2.0% (Vanguard Group data).
About 40% of the working population isn’t saving enough to maintain their lifestyle in retirement. The current personal savings rate of 4.5% in America 5.7% in Canada needs to rise significantly, and that means less per capita consumption spending in developed economies that have become dependent on it for the bulk of economic growth.
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Danielle Park July 31st, 2025
Posted In: Juggling Dynamite
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