📉 Aggressive Spending vs. Low Sentiment: Analyzing the Paradox of the US Consumer Economy in November 2025

I. The Depth of Low Sentiment and Rising Uncertainty

Consumer sentiment, as measured by the University of Michigan's index, fell sharply in November 2025 to levels only modestly above the low recorded during the peak inflation of mid-2022. This pervasive gloom is driven by several factors:

• Cumulative Price Shock: While the pace of inflation has receded, consumers are still struggling to adjust to the high absolute prices of food, housing, and other staples. This lingering "sticker shock" severely impacts the perceived purchasing power of their incomes.
• Political and Policy Uncertainty: Major geopolitical tensions and, notably, a prolonged federal government shutdown earlier in the fall created widespread consumer worry about potential negative consequences for the broader economy and job stability.

• Weakening Income Perception: Consumers are expressing frustration over perceived weakening incomes and slower job creation, eroding confidence in their personal financial outlook for the year ahead.

II. The Resilience of Spending: The Income Divide and Debt

Despite the pervasive pessimism, aggregate spending has remained strong, supporting overall GDP growth. This paradox is resolved by looking beneath the surface at who is spending and how they are financing it.

1. The K-Shaped Economy

Spending is not uniform but reflects a stark "K-shaped" economic reality:

• Higher-Income Resilience: Households with substantial financial assets (often benefiting from the strong stock market rally of 2025) have largely been able to absorb higher prices and continue discretionary spending, carrying the aggregate retail sales figures.
• Lower-Income Strain: Lower- and middle-income households are facing the lingering pain of surging costs and are becoming increasingly selective in their spending, focusing on necessities while pulling back on discretionary items like big-ticket electronics and apparel.

2. The Debt Fuel

A significant component of the aggressive spending is being financed by debt, rather than savings:

• Record Credit Card Debt: As of Q3 2025, total US credit card balances hit a record high of $1.23 trillion, up nearly 6% year-over-year.
• Rising Delinquencies: Total household debt reached $18.59 trillion, with serious delinquency rates rising across nearly every debt category, including auto loans and credit cards. This suggests that for many households, aggressive spending is a result of financial strain (using credit to cover basic living expenses) rather than confidence.

III. The Near-Term Risk: When Consumers "Blink"

The current paradox—low sentiment combined with high debt and spending—is inherently unstable. Economists widely agree that the key risk heading into 2026 is that consumers will inevitably "blink."

• Tipping Point: The combination of rising debt payments (with average credit card APRs above 21%) and persistent high prices could force a sudden, sharp pullback in consumption, particularly if the job market cools further.
• Behavioral Shift: The decline in discretionary spending intentions observed in holiday outlook surveys indicates that the low sentiment may finally be translating into changes in behavior, signaling a potentially more tepid holiday season than macro data alone might suggest.

For now, the economy is sustained by the inertia of the labor market and the spending power of the affluent. However, the record debt and negative sentiment signal a deep structural unease that could quickly destabilize aggregate spending if economic conditions worsen.