Goldman Sachs is betting on the American shopper. David Mericle, the firm’s chief U.S. economist, claims the consumer is not dead yet. He argues the narrative of a spending collapse is premature. He is looking at the wrong ledger. The surface looks calm. Retail sales figures for March showed a 0.4 percent increase. This beats the consensus. However, the internals tell a darker story. Spending is being funded by plastic and desperation. According to recent data from the Federal Reserve, credit card balances hit a record $1.4 trillion this month. The cost of carrying that debt is at a generational high.
The Illusion of Resilience
Mericle admits the phenomenon of consumer weakness will grow later this year. This is an understatement. The lag effect of monetary policy is finally catching up. Real disposable income is stagnant. The excess savings cushion from the pandemic era has evaporated. We are now seeing the first signs of a structural shift in spending habits. The April 24 PCE report confirmed the trend. Core inflation remains sticky at 2.8 percent. This forces the Fed to keep rates higher for longer even as the labor market softens. Households are squeezed between high prices and high borrowing costs. The wealth effect from a buoyant stock market only benefits the top quintile. The bottom 60 percent are tapped out.
US Personal Savings Rate Trend 2024 to 2026
The Credit Spigot is Closing
Look at the savings rate. It has plummeted since early 2024. In April 2026, it sits at a precarious 3.1 percent. This is well below the historical average of 8 percent. Consumers are not spending because they are wealthy. They are spending because they have no other choice. Necessity is driving the numbers, not confidence. Default rates are the canary in the coal mine. Subprime auto loan delinquencies have crossed the 2008 threshold. This is not a soft landing indicator. It is a sign of systemic stress. Banks are tightening lending standards across the board. The latest Senior Loan Officer Opinion Survey suggests that credit availability is shrinking. When the credit spigot closes, the consumer engine stalls.
The Labor Market Anchor
Mericle’s optimism relies on a resilient labor market. But unemployment is ticking up. The quit rate has fallen to pre-2020 levels. Workers are no longer confident enough to jump ship for higher pay. Wage growth is trailing inflation in key sectors like healthcare and housing. The math does not add up for the long term. If the job market loses its footing, the debt bubble bursts. We are seeing a divergence between the headline GDP and the reality on Main Street. The former is propped up by government spending. The latter is drowning in interest payments. The narrative of the invincible consumer is a convenient fiction for Wall Street. It ignores the exhaustion of the middle class. The next data point to watch is the May 1 FOMC statement. If the Fed acknowledges the divergence between spending and solvency, the market will reprice quickly. Watch the delinquency rates for tier-two credit cards. They will hit 5.2 percent by June.
