Consumer Analysis
Stressed Consumers Face Rising Inflation and Low Savings Despite Improving Sentiment
Consumer Health Dashboard
Percentile 27 -- Stressed
| Domain | Current | Change | 3M Trend | Percentile | 20Y Range | Median | Score |
|---|---|---|---|---|---|---|---|
| CPI YoY | 2.4% | +0.27% | Rising | 54 | -1.96 - 9.0 | 2.32 | 46 |
| Retail Sales MoM | -0.2% | -- | Rising | 23 | -14.37 - 19.31 | 0.33 | 23 |
| Consumer Sentiment | 56.6 | +0.2 | Rising | 5 | 50.0 - 101.4 | 77.5 | 5 |
| CC Delinquency | 2.98% | -0.06 pp | Falling | 59 | 1.53 - 6.77 | 2.64 | 41 |
| Savings Rate | 4.5% | +0.5 pp | Falling | 20 | 1.9 - 31.8 | 5.6 | 20 |
Score: health-adjusted percentile (CPI and Delinquency inverted; higher = healthier). Composite is avg of 5 scores.
12-Month Trends
CPI YoY Inflation
Retail Sales (MoM %)
Consumer Sentiment
CC Delinquency Rate
Personal Savings Rate
Health-Adjusted Percentiles (20-year lookback, inverted where lower = healthier)
CPI Inflation (inv)
Retail Sales
Sentiment
CC Delinquency (inv)
Savings Rate
Signal Alignment
Diverging (1/5)
No specific divergence patterns detected, but only 1 of 5 domains agree on direction.
Historical Parallels (+/-20.0 pctl pts)
4 similar periods found
| ETF | 3M Median | 3M Win% | 6M Median | 6M Win% |
|---|---|---|---|---|
| XLY | +9.5% | 75% | +22.0% | 75% |
| XLP | +2.7% | 50% | +1.8% | 75% |
| SPY | +7.1% | 75% | +12.0% | 100% |
Matching periods: 2025-09-01, 2025-05-01, 2025-02-01, 2024-08-01
The February 2026 Consumer Health Report paints a picture of a household sector under significant pressure, with the composite score languishing at the 27th percentile. While headline inflation remains moderate at 2.4%, the underlying trends show a deteriorating environment for purchasing power. Retail sales have dipped into negative territory on a month-over-month basis, reflecting a pullback in discretionary spending. Consumer sentiment remains near historic lows at the 5th percentile, even as it shows a marginal month-over-month improvement. Credit conditions offer a rare bright spot as delinquency rates fall, yet the overall financial cushion is thinning. Personal income growth is struggling to keep pace with rising costs, leaving the personal savings rate at a vulnerable 20th percentile ranking.
Inflation Impact
| Component | YoY | MoM | Trend |
|---|---|---|---|
| Headline CPI | +2.4% | +0.27% | Rising |
| Core CPI | +2.5% | +0.22% | Rising |
| Food | +3.1% | +0.39% | Rising |
| Energy | +0.4% | +0.63% | Rising |
| Shelter | +3.0% | +0.23% | Rising |
Headline CPI has reached 2.4% year-over-year, but the three-month trend indicates that price pressures are accelerating rather than cooling. Core CPI is slightly higher at 2.5%, suggesting that inflationary pressures are becoming embedded beyond volatile categories. Food prices continue to outpace the headline figure with a 3.1% annual increase, directly squeezing weekly grocery budgets. Shelter costs remain a persistent burden at 3.0% growth, limiting the disposable income available for other essential needs. Energy prices have remained relatively stable at 0.4% growth, providing a small reprieve compared to other categories. However, the steady acceleration in both headline and core indices suggests that the cost-of-living crisis is intensifying for the average household.
Spending Trends
| Component | Level | MoM | YoY |
|---|---|---|---|
| Total Retail | $733.5B | -0.2% | +3.2% |
| Core (ex Auto) | $595.4B | +0.4% | +4.0% |
| Food Services | $99.4B | -0.4% | +4.1% |
| E-Commerce | $310.3B | +1.9% | +23.1% |
Total retail sales contracted by 0.2% in February, signaling a clear deceleration in consumer momentum after a period of rising trends. This decline is particularly evident in food services, which saw a 0.4% drop, suggesting consumers are cutting back on dining out. Despite the weak monthly print, e-commerce remains a powerhouse of growth, surging over 23% year-over-year in the most recent quarterly data. Consumer sentiment, while still at a dismal 56.6, is showing signs of a nascent recovery with a three-month accelerating trend. This divergence between actual spending and improving sentiment suggests a wait-and-see approach from households. The 23rd percentile ranking for retail sales highlights that current spending levels are historically weak compared to the last two decades.
Credit Stress
| Metric | Level | Change |
|---|---|---|
| Total Consumer Credit | $5114.7T | +0.2% |
| Revolving (CC) Credit | $1313920B | -0.2% |
| CC Delinquency Rate | 2.98% | -0.06 pp |
Credit card delinquency rates have improved slightly to 2.98%, moving down by 0.06 percentage points this month. This falling trend in delinquencies suggests that consumers are prioritizing debt repayment even as other financial indicators weaken. Total consumer credit growth has slowed to a marginal 0.2% monthly increase, indicating a more cautious approach to new borrowing. Interestingly, revolving credit actually contracted by 0.2%, which may signal either a voluntary deleveraging or tighter lending standards from banks. Despite the improvement, the delinquency rate remains in the 59th percentile, which is higher than the historical median. The deceleration in delinquency growth is a positive sign, but it occurs against a backdrop of high interest rates and market volatility.
Income Resilience
| Metric | Level | Change |
|---|---|---|
| Personal Income | $26.70T | +0.4% |
| Savings Rate | 4.5% | +0.5 pp |
| PCE (Spending) | $21.54T | +0.4% |
Personal income grew by 0.4% in February, matching the growth in personal consumption expenditures for the same period. The personal savings rate saw a modest bounce to 4.5%, up 0.5 percentage points, yet it remains deeply depressed at the 20th percentile. This low savings rate indicates that households have very little margin for error if economic conditions worsen further. While income is rising, the three-month trend for the savings rate is falling, suggesting that consumers are dipping into reserves to maintain lifestyle. The 4.5% savings rate is significantly below the 20-year median of 5.6%, highlighting a lack of financial dry powder. Without a more robust acceleration in wages, the current pace of spending appears unsustainable over the long term.
Consumer Stocks
| Stock | Price | 1D | 1M | YTD |
|---|---|---|---|---|
| WMT Retail | $122.89 | +0.6% | -1.2% | +10.3% |
| AMZN E-Commerce | $199.34 | -4.0% | -4.1% | -13.6% |
| COST Retail | $983.86 | +0.4% | -0.3% | +14.1% |
| TGT Retail | $119.84 | +2.4% | +4.4% | +22.6% |
| MCD Restaurants | $305.90 | -1.0% | -8.0% | +0.1% |
| HD Home Improvement | $321.65 | -2.1% | -14.2% | -6.5% |
| V Payments | $295.52 | -3.3% | -6.7% | -15.7% |
| MA Payments | $484.24 | -3.3% | -5.9% | -15.2% |
Performance among consumer-facing stocks is highly bifurcated, with value-oriented retailers like Target and Walmart showing relative strength. Target has surged 22.6% year-to-date, benefiting from a flight to value as consumers seek to stretch their dollars. Conversely, high-growth and discretionary names like Amazon and Home Depot have struggled, with Amazon down 13.6% this year. Payment giants Visa and Mastercard have both seen sharp declines of over 15% year-to-date, reflecting concerns about slowing transaction volumes. McDonald's has also faced headwinds, dropping 8% over the last month as dining out becomes a luxury for many. This divergence suggests that investors are favoring defensive staples and discount retail over discretionary and cyclical consumer plays.
Market Reaction
The broader market has reacted poorly to the mix of rising inflation and stalling retail growth, with the S&P 500 down 7.8% over the last month. Volatility has spiked, with the VIX reaching 31.1, a level typically associated with high fear and market instability. Sector performance shows a clear defensive tilt, with Energy and Materials outperforming while Technology and Communication Services lead the decline. Consumer Discretionary stocks have been particularly hard hit, falling 9.7% in a month as the stressed consumer narrative takes hold. The 10-year yield at 4.42% continues to put pressure on valuations, especially for companies sensitive to consumer borrowing costs. Investors are clearly pricing in a period of stagflationary pressure where growth slows while prices remain sticky.
Fed Implications
The Federal Reserve faces a difficult balancing act as CPI trends show steady acceleration despite weakening retail sales. With headline inflation at 2.4% and core at 2.5%, the Fed may feel pressured to keep interest rates higher for longer to prevent a resurgence. The 1-year inflation expectations of 3.4% are well above the Fed's target, suggesting that inflation psychology is becoming unanchored. However, the 27th percentile composite score for consumer health warns that the economy is becoming increasingly fragile under current policy. The Fed must weigh the risk of a consumer-led recession against the need to fully extinguish inflationary pressures. Current data suggests that the soft landing window is narrowing as income and savings indicators continue to deteriorate.
Outlook
The outlook for the consumer remains cautious, with the composite score signaling a regime of significant financial stress. Forward-looking indicators suggest that while sentiment may be bottoming, the actual capacity for spending is limited by low savings. Historical parallels suggest that while the S&P 500 often recovers over a 6-month horizon, the immediate path remains fraught with volatility. Investors should consider overweighting defensive staples like Costco and Walmart, which have shown resilience in this stressed environment. Discretionary sectors and payment processors are likely to remain under pressure until there is a clear reversal in the inflation trend. The primary risk remains a further contraction in the savings rate, which could lead to a more pronounced pullback in aggregate demand.