The fragile US consumer

Debt service as a fraction of disposable income among US consumers, to be sure, is well below the 2008 level. The economy isn’t in danger of a collapse of the consumer balance sheet.

The risk is more limited: With very low hourly earnings growth (around zero in real terms) and a near-record-low savings rate, the change in retail sales during the past year tracks the change in credit card balances.

Retail sales dependence on credit cards

We have seen previously that consumer spending is very sensitive to energy prices. Any shocks to prices (for example, through tariffs on autos or consumer electronics) might cause a reduction in spending.

consumer debt service payments

Chart: St Louis Federal Reserve

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