US economy weak signs

The US economy’s engine may be starting to sputter, as Americans’ paychecks lose steam and their debt becomes even more unwieldy, according to new data released Tuesday.

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Retail sales were unexpectedly flat in December, the crucial holiday month, the Commerce Department reported, well below the 0.4% gain economists predicted. By comparison, retail sales rose a solid 0.6% in November.

Weak Retail Sales Highlight Economic Pressures

Retail sales declined across most of the categories tracked by the Commerce Department in December. Furniture stores and specialized niche stores, such as florists, saw the largest drops in sales—both declining by 0.9%. This data, adjusted for seasonal swings, does not account for inflation.

Meanwhile, retail spending edged higher in a handful of categories, with the most notable increase seen in home improvement stores, which rose by 1.2%.

A measure that strips out volatile sales, such as building materials and gasoline, and gives a better indication of underlying demand, fell 0.1% in December, according to FactSet, well below the 0.4% advance economists had predicted. This figure, known as the “retail sales control group,” is a key indicator economists use to gauge economic momentum.

Slowing Wage Growth and Rising Delinquencies

In the fourth quarter, Americans’ wages grew at the weakest pace in over four years, while a greater share of households fell further behind on their debt, according to separate reports released Tuesday.

The Employment Cost Index, which tracks changes in wages and benefits, rose 0.7% in the last three months of 2025. This marked the slowest quarterly increase since 2021, according to BLS data.

Lower-income consumers, in particular, are facing increased financial pressures. While wealthier households are seeing their wealth rise and continuing to spend, lower- and middle-income households are struggling more to keep up with rising costs. Economists have referred to this dynamic as a “K-shaped economy,” highlighting the divide between the wealthiest and the rest of the population.

Rising Debt Delinquencies Signal Financial Strain

Many lower- and middle-income Americans have increasingly leaned on credit cards and other loans to cope with the rising costs of living. But many are finding it harder to pay off mounting credit card bills, keep up with car payments, and make student loan and mortgage payments.

The latest household debt and credit report from the Federal Reserve Bank of New York revealed that the percent of auto loan and credit card balances that were seriously delinquent (90 days or more late) is at the highest level in roughly 15 years.

The report also highlighted that newly delinquent mortgages (30 days past due) are at their highest in 10 years. These delinquencies are most pronounced in lower-income zip codes, according to New York Fed researchers.

Potential Impact on the US Economy

While the latest debt data doesn’t immediately raise alarms about the overall health of consumers, it does show that a growing number of Americans are struggling financially. This could ultimately hurt the economy in the long run.

“If delinquencies and defaults that wreak havoc on the individual level start to affect wider swathes of Americans, it can negatively impact consumer spending,” said Justin Begley, an economist at Moody’s Analytics. “Consumer spending accounts for two-thirds of economic growth.”