The US economy's recent resilience was significantly cushioned by large tax refund checks, which offset rising energy and food costs. As the benefit of this fiscal stimulus wanes, the true negative impact of sustained high inflation on consumer spending and real income will become much more apparent and severe.

Aggregate economic data looks positive because the top 10% of households drive consumption. However, the bottom 90% are experiencing financial distress, which is reflected in negative consumer sentiment. The 'average' consumer experience doesn't exist, leading to a disconnect between official statistics and public perception.

Contrary to assumptions of an immediate spending spree, consumers are expected to use larger tax refunds primarily for saving and debt repayment. This behavior strengthens household financial health first, indicated by higher loan prepayments and fewer delinquencies, delaying a significant rise in discretionary consumption.

Despite tax cuts, total real after-tax income for Americans has shown zero growth year-over-year as of March. This stagnation in aggregate purchasing power, combined with a low savings rate, signals significant vulnerability for consumer spending, the economy's primary engine.

Instead of fueling a spending surge, this year's larger tax refunds helped consumers absorb the shock of high inflation, particularly in gas prices. This temporary cushion has propped up spending, but the underlying consumer is stretched, as seen in rising delinquencies.

A recent behavioral shift shows households are using extra cash, like tax refunds, to pay down debt rather than increase spending. This deleveraging due to affordability concerns means that any new government stimulus would likely have a much smaller effect on economic growth than historical models would predict.

Contrary to popular belief, the U.S. consumer shows weakness. Nominal goods consumption is up only 3.5% over the last year, and real spending is below 2%. This indicates that price inflation is primarily driven by supply shocks, not strong demand, challenging the narrative of a resilient consumer.

Beneath the surface of AI-driven growth, the US consumer is strained. Real income growth is flat, and spending is sustained only by a rapidly falling savings rate, now at pre-2008 crisis lows. This indicates the economy is more fragile than headlines suggest and vulnerable to a spending pullback.

While headline forecasts predict a 3.5% rise in holiday sales, this is nearly entirely offset by inflation, which is running close to 3%. In real terms, consumer spending will be flat at best, meaning the average family's standard of living is declining this holiday season.