This episode explores the state of the U.S. consumer and the factors influencing consumption spending in early 2025, three months into President Trump's second term. Against the backdrop of lowered forecasts for nominal consumption spending due to increased policy uncertainty, the discussion analyzes recent consumer spending trends. While consumer spending growth held up well in 2024, exceeding pre-COVID averages, a weakening in consumer sentiment and spending data emerged in early 2025. More significantly, the panel delves into the rising delinquency rates in auto and mortgage loans, although these increases are not uniform across all consumer credit products and don't yet signal a systemic risk. The impact of tariffs, wealth distribution, and immigration on consumer spending is examined, with the conclusion that reduced immigration could negatively affect labor market income for lower and middle-income cohorts. Finally, the discussion touches upon the U.S. housing market, noting affordability challenges, low inventory, and the potential for sustained home price growth despite soft builder sentiment. What this means for the overall economy is a cautious outlook, with potential downside risks stemming from further spending cuts.
