December 2025 NFFS Economic Advisor Now Available

The December 2025 issue of NFFS Economic Advisor is now available for all NFFS members. 

FEATURED ARTICLE

A Closer Look: The U.S. Economy - Borrowed Time or Sustainable Strength? A Look at Consumer Debt
by Haley Sienkiewicz, ITR Economics

Overall, consumers are managing debt effectively, a positive sign for future spending

Well-positioned consumers are driving growth in the macroeconomy, supported by mildly rising real incomes. US Total Retail Sales are rising, and consumer delinquency rates are generally on par with historical averages. Some isolated areas of weakness — notably, elevated auto loan delinquencies — are balanced by some stronger areas such as low mortgage delinquencies. At present, though, consumer metrics are signaling relative stability, which we expect will persist.

A central pillar of household finances is debt. US Total Household Debt has been rising for the past dozen years, mounting higher each year. Households rely on debt to fund necessities and everyday expenses, which generally rise in cost. Consumer Prices have risen a cumulative 26% since the end of 2019. This alone, however, is not cause for concern, as real incomes have risen to support debt-funded spending.

One metric for consumer health that factors into rising incomes is the debt-to-income ratio. In September, US Household Debt per Capita as a Percentage of US Median Annual Earnings was 107.0%. This metric is well within recent precedents, signaling that households are well positioned to weather economic swings. This resilience will vary by income bracket, however, with upper middle- to upper-income households being relatively more agile than their low- to middle-income counterparts.

It is important to factor in fluctuations in borrowing costs. While rising incomes have helped offset higher debt levels, it is worth considering how much strain elevated interest rates have placed on household balance sheets in recent years. The answer: not as much as you might think. The high-level metric of US Household Debt Service Payments as a Percent of Disposable Personal Income, coming in at 11.3%, is trending below preCOVID levels despite interest rates being higher.

This percentage reached near-record lows in 2021 amid disruptions from the pandemic, stimulus checks, and low interest rates, but has since risen. Despite sloping upward, US Household Debt Service Payments as a Percent of Disposable Personal Income have been trending below pre-pandemic levels, a positive sign that, in aggregate, consumers are managing their debts well amid the high interest rate environment, an encouraging bellwether for future economic growth.

While aggregate conditions are stable, sensitivity to pricing, financing terms, and value proposition is likely to rise, particularly among lower- and middle-income customers. Focus your strategy on affordability, flexible payment options, and clear value differentiation to sustain demand during the upcoming period of mild economic growth. 

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Also in this month's Advisor:

• ITR's Macroeconomic Outlook:  "We are about to close the book on 2025, a year filled with volatile trade policy, heightened geopolitical tensions, and the longest government shutdown in US history. Despite these substantial headwinds, some sectors have grown this year, and many are poised to grow mildly in 2026, a testament to the health of US consumers and businesses. The labor market is supporting mild — though below average — real income gains, and consumer and business financial metrics are broadly stable. The economy is entering the new year prepared for growth, albeit at a magnitude more muted than some recent cycles."
• Make Your Move:  "Carefully monitor material input costs for your industry. Locking in prices now could pay dividends down the line as pricing pressures broadly heat up."
• Investor Update:  "Despite daily swings, the S&P 500 posted a 0.1% gain in November, ending a rare six-month run of 2.0%+ gains seen only in 1935, 1975, and 1995. A pause was normal. With policy uncertainty generally easing, investors can refocus on economic fundamentals: real income rose modestly in the third quarter and consumer debt is manageable. The data suggests that the US economy still has room to run." 
• ITR Economics' Long Term View:  "2025 - Mild Growth, 2026 - Growth,  2027 - Slowing Growth, Manufacturing Flat"
• Leading Indicator Snapshot: "General rise in the ITR Leading Indicator™ is a positive signal for mild growth in industrial sector in 2026. Economic fundamentals are sound. Volatility in some leading indicators is likely the result of lingering uncertainty and will likely yield milder-than-average economic growth rather than fundamental weakness. Mixed leading indicator signals suggest that while mild growth is likely to characterize the industrial sector overall, outcomes will be divergent across markets; knowing the specific trajectories of your market(s) is key for planning appropriately this business cycle."
• Manufacturing Industry Analysis:  "Annual US Total Manufacturing in September was 0.2% above the year-ago level. Some manufacturing segments are trending at record highs, such as computers, oil and gas, and utilities, while other segments peaked decades ago, such as mining (excluding oil and gas) and furniture. Manufacturing is generally poised for mild rise, but outcomes will vary across segments."
• State-by-State: GDP:  "US Real Gross Domestic Product (GDP) rose in the second quarter. Third quarter data is delayed due to the prior government shutdown, but the Weekly Economic Index (WEI), which estimates GDP growth, suggests that growth occurred during that time. All US states experienced year-over-year growth in the second quarter. On average, GDP growth was strongest in the South and West regions. The Midwest had the mildest growth. GDP is positioned for further growth given relatively sound economic fundamentals, including a stable consumer, but growth overall is likely to be mild."
• Reader's Forum:  "My company's input prices are not aligning with the US Producer Price Index. What can I do to be more in tune with pricing?"  Haley Sienkiewicz, Economist at ITR Economics™, answers: