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.

The resilience of consumer spending, despite weak employment growth, is driven by affluent consumers liquidating assets or drawing down cash. This balance sheet-driven consumption explains why traditional income-based models (like savings rates) are failing to predict a slowdown.

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.

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 lower-income households were hit first by inflation, a subsequent rise in delinquencies among middle and high-income groups signaled a deeper economic issue. It showed that sustained cost pressures were depleting even larger savings buffers, indicating the strain was not temporary or confined to one segment.

In 2022, a hot labor market and high savings from stimulus buttressed the economy. Today, households are already dissaving to maintain spending amid a weakening labor market. An oil shock now adds a 1-1.5% price hike across goods, threatening to push real household consumption to zero and stall the economy.

The personal saving rate has dropped dramatically to 3.5%, fueled by the stock market wealth effect. This is historically low and below equilibrium, suggesting that consumers cannot continue to fuel economic growth by saving less and the current spending pace is unsustainable.

While the overall debt service ratio appears low, this average is skewed by high-income households with minimal debt. Lower and middle-income families are facing significant financial pressure and rising delinquencies, a critical detail missed when only looking at macroeconomic aggregates.