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At first glance, the U.S. economy entering late 2025 looks deceptively strong. Headline growth remains positive, unemployment near historic lows, and corporate earnings continue to meet or exceed expectations. Yet, beneath this reassuring surface, a deeper unease is emerging. The Financial Times recently reported that real consumer expenditure in the United States has been declining steadily since December 2024, even as aggregate indicators—GDP growth, employment data, and retail indices—suggest apparent resilience.

This divergence between numbers and lived reality is not new, but its implications today are profound.

The Consumption Engine at Risk

Since World War II, U.S. growth has been consumption-driven. Roughly 70 % of GDP originates from household spending—a structure that relies on continuous confidence, affordable credit, and steady real wage gains. During the post-pandemic rebound (2021-2023), stimulus savings and low borrowing costs sustained record spending. However, as those buffers eroded and interest rates climbed beyond 6 % for standard mortgages, the fragility of this model resurfaced.

Historically, similar patterns preceded downturns. In 2007–08, rising housing inventory and stretched household debt ratios were early warning signals that macro-aggregates failed to catch. Today’s context, with unsold housing inventory at its highest since mid-2009, evokes uncomfortable parallels.

The Housing Market’s Quiet Warning

A key stress point lies in the U.S. housing market. Mortgage rates above 6 % have pushed many first-time buyers out, slowed construction activity, and trapped existing homeowners in old, low-rate loans—stifling mobility and new demand. Unsold homes and declining affordability are not just real-estate issues; they are macroeconomic signals.

The U.S. housing sector has traditionally functioned as both an economic multiplier (construction jobs, material demand, home-equity-driven consumption) and a sentiment driver. When prices flatten or inventory piles up, households feel poorer and spend less. This feedback loop, visible in the 1979–1981 Volcker-era slowdown and the 2008 crisis, risks repeating in subtler form today.

The “Good Numbers” Paradox

Why then do headline indicators remain strong? The answer lies in aggregate illusion. Corporate profits have been bolstered by pricing power and cost efficiencies rather than volume growth. The stock market, heavily concentrated in AI and tech megacaps, masks sectoral weakness. Employment statistics—though high—are skewed by part-time, gig, and low-wage positions that sustain numbers but not purchasing power.

Real wages adjusted for inflation remain barely above pre-pandemic levels. In effect, the U.S. consumer is working more, earning the same, and spending less—a classic sign of demand fatigue in mature economies.

The Transition Economy

Looking ahead, this slowdown in real consumer expenditure could mark the beginning of a structural transformation. Advanced economies are entering a post-consumption phase—where digital productivity, automation, and green transition investments, rather than household demand, drive growth.

The challenge for the U.S. will be to reorient growth engines:

From consumption to investment in energy, AI, and infrastructure,

From asset inflation to income sustainability,

From short-term stimulus to long-term productivity renewal.


Such transitions are historically turbulent. The 1970s energy shocks and the 1990s tech transition both involved temporary dips in real household spending before new equilibrium patterns emerged. The same could happen now—but only if policy recognizes that consumer fatigue is not cyclical; it’s structural.

Beneath the Stability, a System in Repricing

The decline in real U.S. consumer spending is not merely a temporary blip—it’s a repricing of expectations across credit, housing, and income. It warns that economies boasting “good numbers” may still harbor weak foundations. For policymakers and investors alike, the message is clear: the next phase of global growth will depend less on how much people spend and more on how intelligently nations invest.

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