US shoppers show strain as spending data softens

The well-known belief is to never bet against the US consumer's ability to spend.

That outlook has served market participants well for an extended period. Americans have repeatedly reached into their wallets and sustained economic momentum.

However, nothing is certain.

Mary Daly of the San Francisco Fed recently remarked that she is "just starting to hear the consumer may be running out of gas."

This may not be a major warning signal. In the October 14 Beige Book, the San Francisco Fed noted: "Retail sales softened slightly. Contacts continued to describe economic conditions as bifurcated or K-shaped, with one contact observing that mounting financial pressures on lower-income families have spread to impact middle-income households."

The K-shaped pattern is not new, and the same Beige Book showed more than half of the districts reported that high-income households drove spending. Still, with the election hinging on affordability, elevated gasoline prices and persistent inflation, this is a point where vulnerabilities could emerge.

Coming up in the next week, Walmart, Target, Home Depot and others will release earnings, providing a solid read on the situation. Official October retail sales data will also come out, with economists forecasting the closely watched 'control group' to rise 0.4% month over month. This may be the week when Wall Street recognises that while it has been focused on AI and the Anthropic IPO, the underpinnings of the US economy have been weakening.

For those who prefer not to wait several days, here is a look at the early indicators:

1. September retail sales control group came in at +0.1% versus the +0.3% expected
2. The September personal income report showed the savings rate at 3.8%, the lowest level since October 2022
3. Bank of America cardholder data revealed spending per household was up 5.8% year over year (nominal), down from 6.2%; lower-income households led at 5.9%; trading down behaviour is at its highest since 2021
4. Redbook same-store sales rose 10.4% year over year in the week ending October 31
5. In McDonald's third-quarter report, US comparable sales declined 0.2%, the first drop since early 2025; industry-wide fast-food traffic fell 2.6%; the CFO did not forecast a stronger fourth quarter. Management noted encouraging underlying traffic trends in October
6. The New York Fed's October expectations survey showed that the expected chance of missing a debt payment reached 13.8%, the highest since December 2025; 45.3% expect higher unemployment in a year, the most since April 2020
7. Citi luxury card data showed luxury card purchases fell 6% year over year in September, following 4% declines in both July and August
8. The CNBC/NRF Retail Monitor on November 11 reported October retail spending increased 0.2% month over month and 3.6% year over year, with core up 0.3% for the month. That monthly increase was the weakest since November 2025, and CNBC's own headline described it as signs of strain

I do not see obvious signs of a sharp downturn, but I will be watching this week's data at least as closely as the Anthropic IPO.