Economists have been feeling cautious dread for several months. Tariffs, a sluggish labor market, the war in Iran, energy prices climbing in ways that feel uncomfortably familiar — there has been no shortage of reasons to expect the American consumer to finally flinch. Nevertheless, the narrative presented by Mastercard, which joined earlier beats from Visa and American Express on Thursday, was nearly uninteresting. People are still spending. Silently, steadfastly, and in a manner that has started to perplex the very analysts who are paid to forecast otherwise.
There’s a certain irony in watching payment processors become the most reliable narrators of the U.S. economy. They aren’t supposed to be storytellers. They process transactions, collect fees, build pipes. However, they end up knowing something that the rest of us are still figuring out because their networks are situated at the precise moment where intention becomes purchase. “If you were hoping for a recessionary tell, the payment processors did not get the memo,” Michael Ashley Schulman of Cerity Partners said this week, and the line keeps circulating because it captures the strangeness of the moment.
Walk through any mid-tier American mall on a weekday afternoon — the kind with a Sephora near the entrance and a half-empty food court in the back — and the bifurcation everyone keeps talking about is visible without a single chart. Wealthier shoppers stroll out with bags. Lower-income families stop at the essentials. The so-called K-shaped economy isn’t an abstraction; it’s two different rhythms happening in the same building. Higher-income households, buoyed by a stock market that recovered its Iran-war losses faster than most expected, have gone back to discretionary spending almost without pause. Naturally, the lower half has gotten tighter.
Jeremy Barnum of JPMorgan, however, provided something more akin to a verdict. He told analysts, “The consumer basically seems to be fine,” presenting the credit picture as inextricably linked to the job market. He contended that even if you tried, it would be difficult to create widespread weakness given the 4.1% unemployment rate. It is a read that can be justified. Additionally, if something unexpected changes, it’s the kind of statement that ages quickly.
The aggregate, however, continues to hold. In June, retail sales increased by 0.6% to about $720 billion, close to all-time highs. The volume of debit and credit cards at JPMorgan increased by 7% annually. Spending on Citi-branded cards increased by 4%. Wells Fargo reported an 8% increase in credit card purchase volume, while Bank of America saw comparable growth. These are not sentiment indexes or survey results. These are the actual swipes—millions of them every day, captured in real time by the financial institutions.
Naturally, this type of resilience may conceal its own deterioration. Pocket delinquencies have increased. With the Conference Board’s index at 92.8 in April and expectations for the future significantly more pessimistic than the present, consumer confidence is still lacking. Before the year is out, certain categories may still be impacted by higher gas prices, lingering tariff effects, and the disruption of important travel routes through the Middle East. Mark Mason, the CFO of Citi, issued a warning about “further consumer cooling in the second half,” which is the kind of cautious language used by executives when they are unsure of the future.
It’s difficult to ignore how the spending narrative continues to outlive the surrounding doom narrative. Approximately 70% of GDP comes from personal consumption, and thus far, the consumer is doing the heavy lifting. They are dispersed, uneven, nervous in surveys, but seemingly unconcerned at the register. It’s really unclear if that will continue into the second half of the year. As of right now, the payment networks possess the receipts, which indicate expenditure.
