Despite record-low sentiment, consumer spending has been artificially propped up by tax refunds and cuts. This financial cushion is now gone, leaving consumers to face high prices without support. This suggests a pullback in spending is imminent as the disconnect between sentiment and behavior resolves.

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.

Despite headline economic growth, the bottom 80% of U.S. households have seen their spending power stagnate since before the pandemic. Their spending has grown at exactly the rate of inflation, meaning their real consumption hasn't increased. This data explains the widespread public dissatisfaction with the economy.

Despite a still-growing labor market, real wage growth has slowed to "stall speed." This lagged effect on middle and lower-income households is the primary driver for the projected 2-percentage-point drop in real consumption growth for Q4 and Q1.

Real consumer spending is up only 1% year-to-date (non-annualized), which annualizes to a weak 1.5%. This is a significant slowdown from the typical 2-2.5% growth in previous years, indicating that consumers are substantially pulling back their expenditures.

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.

The US personal savings rate fell to a dangerously low 2.6%. This reflects households drawing down savings to maintain spending amidst high inflation, a clear sign of financial stress. Such a low rate suggests current consumption levels are unsustainable without a rebound in real income.

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.