⚠️Personal consumption - the pillar of the American economy is being eroded: When CPI or labor data is only part of the picture.

📌In an economy where personal spending accounts for ~70% of GDP, any weakening from consumers (, especially the lower middle class ), is systemic. Data from Q4/2024 indicates that this support has weakened to an alarming level:

🔶 1. The consumer debt spiral has become dangerously tense since Covid.
- Total credit card debt has surpassed $1.2T - the highest in history.
- The average credit card interest rate has reached 22.8% - the highest in history.
- The under 35 age group with low income is the group with the highest rate of default, and it is also the first group to completely deplete their savings after Covid since mid-2023.
- Excess savings after COVID have been depleted, the percentage of people who can manage to access $2,000 in urgent situations has dropped to 63% - the lowest in the history of the survey.

Americans live on credit, but high interest rates have gradually eroded future purchasing power. Credit is a lever for the economy, but it is now gradually becoming a risk. Not to mention that the national debt of America has exceeded the ceiling.

🔶 2. Declining consumer behavior
- Americans are shifting from major brands to cheaper private label products at Walmart and Costco.
- Limit eating out, traveling, and electronics to prioritize essential goods.
- Installments purchase via Affirm, Klarna is increasing sharply ( similar to FE Credit or hot loans through apps in VN) because traditional credit is not accessible.
Americans are accustomed to consumption and do not have the frugal saving culture like Asians. The consequence is a decrease in personal credit quality ( and this has limits ).

🔶 3. Credit Stress is continuously increasing
- The debt service ratio on income (Debt service ratio) continues to increase, especially in consumer debt.
- The mortgage refinancing rejection rate exceeds 40%, which is 4 times higher than the end of 202.
The risk of sell-off and halting new purchases of real estate is increasing.

🔶 4. The trio of soft signals are all bad
- Consumer confidence has declined.
- Unemployment expectations for the next year are increasing.
- Inflation expectations remain high despite the continuous decline in CPI.

📌Americans are in the most financially vulnerable stage in nearly 2 decades, but the leverage ratio on the US financial market (is mostly stocks) and is at a record high. Just 1 domino falls, the black swan will come and you won't even have time to understand why.