August 10, 2026

The below transcript is a translation of the podcast audio that has been machine generated by Notta.

Tara Bayke

When we look at the share of consumers and their total credit card debt, the percentage that are currently just able to make that minimum payment versus the consumers who are actually paying off the full balance every month, so they’re using their credit cards the way they’re supposed to. They’re charging it, getting their points, their cash back, and they’re paying off the full balance by the end of the month. Both of those metrics are actually rising. So the pressure that we’re seeing on the bottom half of consumers, that’s, that’s not, you know,  , it- it’s not to the point where we’re seeing a red flag or majorly concerned, but we do see an uptick in that metric.

Taylor St. Germain

Hi, everyone. This is Taylor St. Germain with ITR Economics. Thanks so much for joining me on this episode of TrendsTalk. We at ITR are your apolitical and unbiased source of economic intelligence. And today we have Tara joining us. Tara is an economist, senior consultant, public speaker, number of titles here at ITR, second time on Trends Talk, so we’re happy to have you back, Tara. Thanks for being here.

Tara Bayke

Thanks for having me.

Taylor St. Germain

So today, Tara and I are going to unpack the consumer a little bit. There’s been a lot of questions around the consumer. There’s a lot of uncertainty in the economy, as everyone knows, and, and I know we focus a lot on the industrial economy and manufacturing, given our client base here at ITR. But I think it is important to unpack the consumer. The consumer drives about two-thirds of US GDP, so boy, the health of the consumer is very important to us here at ITR.  And we’re going to look at the consumer through a few different lenses today. Um, you know, we’ll highlight retail sales. We’ll take a look at which income brackets of consumers are performing better than others. We’ll look at things like credit card payments, and then finally, we’ll unpack trends like what costs for consumers are rising faster than their incomes. So I figured we’d start with our overall benchmark. We use retail sales as a benchmark for consumer spending, consumer health. And Tara, I’m hoping you can take us through where we are today and where ITR sees us going as we think about retail sales.

Tara Bayke

Yeah, of course. So one of the key factors that we’re looking at, and like you mentioned, is retail sales. Now, the good news in terms of retail sales is that we’re seeing an uptick, a steady, really over the past couple of years, rise in terms of retail sales. Now, that tells us a couple of things. One thing is that despite this higher inflationary environment, the consumer is still spending. So this is great for that overall GDP outlook, that growth that we like to see.  Now, another area we look at, of course, is how much money is being spent overall. It’s one thing to look at this in terms of rates of change and whether we’re spending, but is that amount rising? And it is, and part of that is because of this higher priced environment. But again, the fact that that spending is continuing tells us that we’re still looking at some healthy GDP growth over the next couple of years.

Taylor St. Germain

Yeah, and Tara, for everyone listening too, you know, I think some important context is we’re not forecasting any negative numbers in retail sales for the next three years, right?

Tara Bayke

Oh, actually, our forecast for retail sales is continued growth in terms of the spending that we’re seeing. We’ve already been seeing, in terms of the dollar amount, that’s rising.  Our forecast is a continued rise and a general rise in terms of that rates of change as well. So the consumer is, they’ve still got something in their pockets that they’re spending, and we anticipate that continuing for the next couple of years.

Taylor St. Germain

Yeah, it’s remarkable how many people tend to count out the US consumer over these last 12 months, but it shows how resilient we really are here in the, in the US. And so I think, Tara, I appreciate the, the background on retail sales, because I think it’s a message everyone needs to hear, that we are still spending.  Now, one direction I do want to take this conversation is the fact that we do see different levels of health and prosperity among the different income brackets. So, you know, I’ll give you a, a little bit of perspective on how ITR approaches this. So what we do is we break down the consumer into five different brackets. We look at the bottom 20% of consumers. We look at the bottom 20 to 40% of consumers based on income, the 40 to 60th percentile, 60 to 80th percentile, and finally, the top 20% of earners here in the US. There’s a reason I’m calling this out, because if we look at just food, housing, and healthcare as a percent of overall expenditures, the bottom 20% are seeing those costs rise. So about 68% of overall expenditures for the bottom 20% of consumers in this country are going to just food, housing, and healthcare. That is a big number, and it’s only getting worse. It’s similar for the bottom 20 to 40% of earners in this country. Food, housing, and healthcare as a percentage of expenditures is about 63, 64%, and that is rising. So the bottom 40% of earners are seeing their costs rise, and rise faster than the long run average. It feels pretty challenging out there for the bottom 40% of consumers in our country, and I do think we need to acknowledge that. Now, the reality is, you know, a metric like retail sales, like Tara mentioned, is likely being driven more by the top 60% of earners, because the top 60% of earners are seeing the opposite of the bottom 40%, which is that food, housing, and healthcare as a percentage of their expenditures is actually declining below the long run average. So it does show this dichotomy in the US economy today, which is that the bottom 40% of earners are struggling, while the top 60% of earners really seem to be the ones flourishing.  So it’s a way that we take this big consumer trend here in the US and break it down to look at, at it on a more granular basis, and that’s not the only way we unpack the health of the consumer. Um, I think, Tara, you’ll tell us a little bit about how folks are paying their credit cards here.

Tara Bayke

Yeah, absolutely. I think this is probably the easiest way to see this dichotomy in the economy right now when it comes to the consumer. When we look at the share of consumers and their total credit card debt, the percentage that are currently just able to make that minimum payment versus the consumers who are actually paying off the full balance every month. So they’re using their credit cards the way they’re supposed to. They’re charging it, getting their points, their cash back, and they’re paying off the full balance by the end of the month. Both of those metrics are actually rising. So the pressure that we’re seeing on the bottom half of consumers, that’s, that’s not, you know, it’s not to the point where we’re seeing a red flag or we’re majorly concerned, but we do see an uptick in that metric.  So that tells us exactly what you were saying, Taylor. They’re feeling more of that pressure. But at the same time, that top percentage of the, of the economy, those consumers, they’re also just, you know, hanging on. They’re, they’re doing okay. They’re able to manage their household expenses and be able to pay off their credit cards in that way. And this is a lot of that K-shaped economy narrative that you’ll hear a lot in the media, and if you’re wondering what that means, it’s essentially the divergence in the consumer base and that top percentage and how they’re performing versus the bottom half. And we can see that very quickly and clearly in terms of how we’re managing debt overall as a, as a country.

Taylor St. Germain

Yeah, and again, folks, like I wanna remind you, this doesn’t mean our economy’s going off the rails. Like we said, we still have positive retail sales numbers. We have positive GDP numbers for the next three and a half years. It’s not until 2030 still when we expect the next downturn.  But again, whether you’re breaking this up by the income brackets or whether you’re looking at the fact that more folks are making the minimum credit card payment, but more folks are also making the full balance payment, it just tells us we need to get more granular than just staring at macroeconomic data. And so I, I think those, you know, the example I shared, the example Tara shared really highlights, you know, depending on who your products are targeting or if you’re just thinking about the health of the economy, we need to take a step down from looking at GDP to really unpacking some of these trends. And, you know, the la- the last thing I’ll, we’ll share with you all is we’re not just focused on, you know, spending and, you know, on credit cards and on income brackets. We’re also taking a look at inflation. If you head over to our sister podcast here, Fed Watch, Connor’s been keeping you all updated on inflation and interest rates, and he’ll continue to do so. So, yeah, check his podcast out just, if you want some insight on the Fed and rates. The way I’m approaching this is a little bit different. I look at a metric like median income and, you know, we, Tara, myself, our public speakers at ITR have shared this chart a lot over the past year. We look at median income since the year 2000, and then we look at costs related to median income. So we’re basically correlating costs with median income. And there are four costs that I’ll call out that are h- rising faster than our incomes are here in the US. That’s college tuition, that’s daycare costs, that’s Medicare costs, and that’s energy costs. All four of those things are rising faster than median income here in the US.  So it’s likely explaining some of the pressure and some of the squeeze that we’re seeing, not just for the bottom 40% of earners, but for consumers generally here in the US. You know, one thing, as, you know, Tara highlighted, we still have this steady growth in retail sales over the next three years, but it’s a lower level of growth than what we experienced, you know, post-pandemic. And I think we all know that time was quite inflated. But there’s a reality. Um, you know, the politicians never ask me, and folks, we don’t get into politics, but if they said, “You know, what are things that we could tackle to try to help consumers?” I’d say it’s those four costs higher than median income. It’s college tuition, it’s daycare costs, it’s Medicare costs, and it’s energy costs. We need a solution to these because those are really deteriorating some of the purchasing power of consumers here in the US.  So all in all, based on everything that Tara and I shared with you today, retail sales are growing. We have healthy growth over the course of the next three years. But different consumers are feeling different pain points relative to others.

Taylor St. Germain

So take a step down from the macroeconomic data and really get into the weeds if the consumer is something that’s important to your business. And finally, folks, inflation isn’t going away, so we are going to have to still deal with this lower level of growth and higher level of inflation leading to profitless prosperity, a topic we’ve covered all too much here on TrendsTalk.  We’ll continue to keep you updated as, as the situation with the consumer progresses, especially with these current events going on around the world. But for now, I really appreciate you all joining us here for this episode of TrendsTalk. Please like and subscribe to TrendsTalk wherever you listen to your podcasts. Look forward to seeing you all on the next one. Thanks so much. Take care for now.