Analysis of consumer financial health shows a shrinking "pivoting middle," which has declined by a net 6% over the last six quarters. These households are bifurcating, with a notable expansion in both the financially-stressed "strivers" (bottom 20%) and affluent "thrivers" (top 10%).
Equifax's data suggests the "subprime experience" is now multidimensional, extending beyond credit scores. A consumer can have a high score but still be a "striver"—struggling financially due to low liquid wealth, assets, and income—making them vulnerable despite their credit history.
Top-line metrics like the debt service ratio suggest consumer finances are stable. However, microdata reveals a "K-shaped" divergence where many households are struggling. This paradox highlights the increasing inadequacy of using macroeconomic averages to assess the true health of the American consumer.
Despite increased costs from tariffs on parts and imports, new vehicle prices have not risen as expected. Automakers have chosen to absorb these costs, taking a hit on profit margins rather than raising prices and risking a loss of market share to competitors.
Although the proportion of consumers with subprime credit scores has decreased since 2019 (from 26% to 19%), overall delinquency rates have held steady. This indicates that financial stress is becoming more concentrated, with a smaller group of individuals experiencing delinquencies across multiple loan types simultaneously.
The NY Fed reports a 13.1% credit card delinquency rate, while lender data (like Equifax's) shows 2.9%. The difference is the NY Fed includes charged-off debt from up to 7 years ago, which is rarely recovered. This "consumer view" creates a misleadingly dire picture of current financial health.
Limited global refinery capacity creates wider profit margins ('crack spreads') for refiners. This means that even when crude oil prices fall, the full benefit isn't passed on to consumers as lower gasoline prices, as refiners maintain higher prices due to production bottlenecks.
The surprising 0% change in June's core CPI was driven by noisy, one-off drops in volatile categories like hotel prices (-3%), apparel, and medical care. This cluster of declines created an unusually low reading that doesn't reflect the underlying inflation trend.
Equifax found that the *acceleration* of inflation (the second derivative of price changes) is highly correlated with the "hollowing out" of the middle class. The velocity of price increases, rather than just the level, appears to be a key driver pushing more consumers into the financially stressed "striver" category.