BREAKINGVIEWS-Americans dig dangerously deep to keep shopping

By Sebastian Pellejero

NEW YORK, Jan 22 (Reuters Breakingviews) - Americans are stretching like never before. They spent some $260 billion more than they earned in wages between April and September, new data shows. It's the inevitable result of labor's ever-sinking, and now record-low, share of national income. Consumer spending is running on credit, depleted savings and investment windfalls, which can only last so long.

Purchases of everything from spaghetti to shampoo increased by about $170 billion in inflation-adjusted terms over the six-month span. Real disposable income also shrank more than $90 billion, creating a dollar deficit not seen since 1959, according to Rosenberg Research. Americans bridged the gap in part by slashing their savings rate from about 5% last January to 4% by September, well below pre-pandemic norms.

The stock market helped supply the rest. An $8 trillion surge in the value of equity held by households over the first nine months of 2025 theoretically could have supported more than $400 billion of consumption, using a rule of thumb from consultancy Oxford Economics that people spend about 5 cents of every dollar in share-related gains. The top decile's massive stock portfolios, however, probably depress the sum.

This is part of the K-shaped economy, where high and low earners diverge. The bottom 90% of households generate about half of all consumer spending with only about 36% of the nation's wealth, per the U.S. Federal Reserve. Credit card balances, home-equity lines and buy-now-pay-later services paper over this gap.

There's fresh evidence of mounting pressure, however. Tide-to-Pampers bellwether Procter & Gamble PG.N disclosed on Thursday that lower-income shoppers cut back on spending in the latest quarter, even for essentials. Sales volumes dipped 1%, below the typical 3% to 4% growth across U.S. categories, CFO Andre Schulten said.

Unsteady employment compounds the problem. Manufacturing is already hovering near recessionary levels, using Institute for Supply Management survey data, while the service sector slows.

Even as artificial intelligence looms large over the job market, machine-learning mania is boosting stock prices. The cost of building data centers and such may be further lifting capital over labor. With interest rates drifting lower and Washington eager to spend freely, easier money also risks propping up asset prices and investment without necessarily boosting demand.

For now, the spending and earning disparity persists. In November, outlays surged by almost $110 billion while disposable income increased only about $65 billion, official data say. At some point, the consumer stretch will really hurt.

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CONTEXT NEWS

U.S. disposable income increased by $12 billion in October and $64 billion in November, according to Bureau of Economic Analysis data released on January 22. Personal consumption swelled by $99 billion and $109 billion over the respective spans.