The current earnings season reveals a resilient U.S. consumer, with personal consumption expenditures (PCE) rising by 0.7% in December, marking the strongest monthly increase in a year. However, this surge in spending is outpacing income growth, leading to a widening gap that consumers are increasingly filling with credit. Personal income and disposable income both increased by only 0.4% in December, while spending grew by 3.1% over the year, highlighting a concerning trend where households are spending more than they earn. The personal saving rate has dropped to 3.8%, the lowest in two years, indicating that consumers are relying heavily on credit cards to maintain their spending habits. Three-quarters of consumers hold credit card debt, with average balances around $5,000, and many are resorting to "buy now, pay later" options to manage their finances. This ongoing balancing act poses challenges for consumers as they navigate rising costs and stagnant income growth.
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