Moody's Talks - Inside Economics - Thriving, Striving or Surviving

Episode Date: July 17, 2026

The financial health of the American consumer is top of mind these days, and no one better to discuss it with than Emmaline Aliff of Equifax and our own consumer maven, Mike Brisson, join the podcast to dig into the evidence. While the consumer sector as a whole remains resilient, the story differs dramatically across the thrivers, the strivers, and the survivors. We also unpack a week full of inflation data with Matt Colyar, who helps us sort through the numbers and their implications for the economic outlook. Guest: Emmaline Aliff, Advisory Leader, Equifax Hosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s Analytics Follow Mark Zandi on 'X' and BlueSky @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Sandi, the chief economist of Moody's Analytics, and I'm joined by my two trusty co-host, Marissa Dina Talley, Chris DREES. Hi, guys. Hey, Mark. Hey, Mark. Hi, Chris. How are you, uh, I know, Marissa, you're out on the West Coast,

but you're not feeling this smoke. It's kind of ironic, right? Oh, yeah. You guys have wildfire smoke? Yeah, it's really pretty bad. I was in New York yesterday, and boy, it was kind of dark. Chris, how are you handling it? It's apocalyptic, right?

Yeah, the sun. Very sad. Yeah, just staying inside, right? That's a... Staying inside? Yeah. Yeah, it's a shame. And then we've got the World Cup championship this weekend, hopefully in New York, no less.

Hopefully it clears up. Yeah. Yeah. Okay. And we have two colleagues, Matt Collier. Matt, good to see you. How are you? This is a CPI week, a PPI week, a inflation week.

and you always join us to go over those statistics, and we'll do that in a second. And we've got Mike Brisson. Mike, we'll talk a little bit more with you later in the conversation, but I thought you'd have you on here to talk about potentially vehicle prices if we have a chance. And we've got a guest, Emily Nealip from Equifx. She's going to join us in a little bit after we get through the inflation numbers

and the news of the week. And we're talking about consumer credit and the condition of the household balance sheets and all that kind of stuff, which is really important for the economy. But let's dive right in. Matt, want to tell us about the inflation numbers this week? Yeah, absolutely. So first data point we got was the Consumer Price Index, which was expected after a bunch of months of big increases because of gas prices.

June was expected to see where to bring a decline based off of what we saw in energy markets, kind of a temporary de-escalation in Iran. So we got a 0.4% decline from May to June in the headline consumer price index that was weaker than our call, which was for a 0.2% decline. And we were even, call it more optimistic. We were lower than consensus. So it really was a big surprise to see the 0.4% decline. Expectedly, a lot of that comes from energy. You had retail gasoline prices averaging $450 per gallon in the U.S. in May and then dropped to $4.405 per gallon in June. That's roughly 10% decline. And that's what we see in the CPI for energy and CPI for gasoline. Food prices. Can I just quickly on that? Are you surprised we haven't seen things are changing very quickly in the wars restarted and gas prices or oil and gas prices are moving back up. But in the month of June, were you surprised we didn't? see an even bigger decline in gas prices, you know, given the declining oil prices?

In looking at oil prices, like just crude prices in general, I think in isolation, you would expect to see that, but so much of that comes to, as you know, crack spreads, which is just, you know, refinery capacity is diminished, and that doesn't really affect crude prices and the ability to move barrels of oil unrefined around the world. But if you want to turn it into jet fuel, gasoline, diesel, that's an extra step in the process that has been diminished. And we're seeing those crack spreads widen. So you don't get the reaction that was maybe implied by gas prices alone. So the crack spread is the profit margin that the refiners are getting. And they're able to not pass through the benefit of the lower oil prices because of lack of capacity in the refining industry,

globally, you know, because I think their U.S. refiners are actually export. product now to the rest of the world because they can get a higher price elsewhere, I think. Right. Yeah. So that's not great relief for consumers because, you know, they're not buying West Texas intermediate crude oil, but they are buying unleaded gasoline, which is slow to come down. And now as we are into July and we see a little bit of the decline that came through June crept into the first week or two of July, but that's since reversed. And now we're at about 390, 395, close to four dollars per gallon. If you look at gasoline futures, that implies we're going north of, you know, 420, 425 in the next week. So we think when we start to peg what the CPI for energy

might look like in July, I think the best case scenario is that it's a neutral contributor, but more than, more likely, we're going to see a positive contribution from gas, which is going to drive a positive contribution for CPA, or CPI relied. Got it. Now food prices. Mild increase. 0.2%. You know, we're expecting some pass through of the higher energy cost to go through to food

that happened early on in the wake of the conflict, but pretty mild again in June. Same increase in May. We're 3% year-over-year for food, food at home. The grocery store proxy

that we're most interested in grew the same. 0.2% on the month up 2.7% year-over-year. So a moderate but important source of inflation. Do you expect because diesel

was a cost or an important part of grocery prices. I mean, you get the food from the seaport or the farm to the store shelf, would you expect to see more pass-through there, or is that pass-through largely now behind us? Do you know? Do you have a sense of that? I don't have a sense of how much pass-through is behind us, but I think we can just return to the crack spreads observation we make. We don't see the diesel coming down, so we shouldn't expect the same. We never expected a one-for-one relief. Just it's not as sensitive to global energy prices as crude and gasoline are. But it should not be much of an expectation to see a bunch of relief.

And I would also add, you know, beef prices. They're rising considerably. You're a month to month. We're looking at a percent increase each month. There's shortages. There's other bacterial issues that have reduced supply and pushed up prices higher. That's separate from what's happening in the Middle East. but it's a significant upward pressure on food prices.

Right, got it. Okay. Where do you want to go next? I mean, if the most important data point from the report, I mean, the headline inflation was going to go up because it's going to go down because of gas prices. But if you look at core CPI and the fact that we got no change or even a very small, rounded to zero decline in core CPI on the month, I didn't see that coming. Markets, didn't see that coming.

And you see a reaction in bond markets initially to that being in the surprise. So 0.0% change in core CPI lowered the year-over-year rate from 2.9 to 2.6. That's significant. And now you're looking at a three-month moving average just with that one month of no growth, much more close to being consistent with the Fed's target. You know, Matt, going to that, because that's surprise, the core CPI inflation was flat. And we expected a modest increase. So what, a couple tons of a percent, I think? 0.2 percent. Others were in that ballpark. Yeah, but you look at the report, it just feels so noisy to me. I mean, you got to see big declines in, what, electricity prices.

They decline. Apparel prices. I'm kind of moving through this sequentially, like, as I reacted to it in real time, as I saw like, oh, man, zero percent of course you happy. Then the next phase is, okay, what are driving this? electricity services down 0.7%. That's a big one. I'm sorry, that's going to be excited.

Of course, CPI, that's worth mentioning, but like medical care. I think the story for healthcare, which is slow moving is you see a run up late 2025. I think the worst or the most, most of that acceleration has rolled over, but we got a 0.1% decline in June. I don't think,

there's no reason more reason to expect continued declines. That's, I think, a one month noise is probably the best way to look at it, and then shelter very similarly. So you got the slowest month-to-month increase in the CPI for broadly for shelter since about late 2020, early 2021. What's happening there?

Big decline, almost 3% in hotel prices. That's volatile. It doesn't tell you much about underlying price pressures, maybe some demand. And that's weird, isn't that? Because to my point about the noise, it's kind of weird, right? Because with the World Cup, you would expect,

I mean, wouldn't you? Yeah. I've one month a hotel I never feel too comfortable drawing conclusions yeah yeah but okay I think even more so is that you get tenant rent tenants rent at OER which are your biggest two components in shelter OER the biggest owner's equivalent rent so the owner occupied housing estimate of prices you get this you know within the range of normal but the very low end of it so it didn't it just was the kind of bouncing around month to month that just kind of coincided and took a 0.1 or a 0.2% increase down to 0%. So, yeah, with the hotel decline of 3%, and all of these things, relatively noisy, but noisy in the same direction, and you get an unusually low reading that I don't think

this tells a ton about trend moving forward. Okay, so, and I mentioned apparel prices. They also decline. They're more volatile month to month. They go up and down, but they were also down quite significantly. So, you know, abstracting from the volatility in the numbers, what do you think underlying, and here's that word again, underlying, and that means abstracting from the vagaries of the data,

the seasonal adjustment issues, the one-off factors, what do you think underlying consumer price inflation is at this point, year over year? What do you think it is? So I'm going to go core CPI. I'm going to say 2.5, 2.7%. No, no, no, overall. Oh, broadly?

Yeah. Oh, you're over 3% just with what's happening in gas prices. prices in energy markets. Yeah, I have, it would take a real sustained de-escalation to get us down to 3%. So I think you'd be safer to say that headline CPI's bouncing around 3.5% the rest of the year. Oh, 3.5% and core excluding food energy is more like... I'd say the 2.5 to 2.7 range. We got some favorable base effects coming up. Yeah, I mean, I look at, like, what happened in Shelter, that was a week reading and hotel amplified it, but Shelton. is now running basically where we expect it to be and it's low. It's not a source of inflationary pressure, food. All those things are a ton of upside risk from from energy prices and other shocks. But the reaction so far and the tariff story has been, I think behind us, the reaction so far for other core CPI items have been not dramatic in response to the war. Yeah, let me bring in Mike. Because the other thing that this has been a perennial, it wasn't a surprise in June. It was vehicle price.

They were kind of soft again. And everything vehicle related is soft, I think, isn't it? Maintenance and insurance, I think. But what we've been, currently if I'm wrong, but we've been kind of expecting inflation there to pick up and it has not. Do I have that right, Mike? And if so, what's going on? Do you know? Absolutely right.

I do want to break up new vehicles and use vehicles. New vehicle market, we have expected the tariffs to raise prices because it costs more on parts. It's going to cost more to import vehicles raising prices for consumers. That never materialized. And the story is that automakers didn't want to lose market share. They have raised prices significantly coming out of the pandemic. They took the losses in margins rather than losing the market share by raising prices. So that's kind of the story that played out there.

We thought maybe it had come this year where there's less political pressure if seen if they start to raise prices a little bit. That hasn't really been the case. On the used vehicle side of things, a few different dynamics. You have a lot more supply now than we had over the previous years. So all the vehicles, the limited vehicles that were produced in 2021 and 2022, now you get to where vehicle sales started to jump up in 23 and 25. and those are getting the used market in 26 now.

So they get three-year lease in 2020, coming out of the market. So there's an increase in supply on the used vehicle market from where we were. So that's put a little bit of a push down in prices. There was a jump in our wholesale indexes at the beginning of the year,

and those haven't flowed through to the CPI yet, which is a retail measure. And I would expect some upward pressure from those increase in wholesale prices, which have they jumped in the first quarter, remained flat from then. So I do expect a little bit of upper pressure in those used vehicle prices the rest of the year.

Got it, got it. Okay. Matt, we also got the PPI, the producer price index, and that came in soft too, didn't it, compared to what we were expecting. It did, yeah. And if an astute listener could,

I think my tone a month ago was more concerned about inflation. I don't think I've pivoted entirely, but if there's an edge that's been sanded off, It's that PPI came in weak, and we got a pretty considerable reduction, a revision to what looked like really strong wholesale price inflation in May. Still looks strong, but not so bad. So 0.3% decline from May to June in the PPI for final demand, so the prices that businesses are charging each other as they work inputs through supply chains. And the increase in May of 1.1% was reduced or revised down to 0.6%, again, still above average.

and PPI is more susceptible to revisions relative to PPI is more susceptible to revisions in CPI. But that's a significant reduction. Service prices, goods prices, that is where the revisions came from. So it is a different picture than what it looked like a month ago. Still inflationary, still high, elevated, but maybe a little bit less worrisome. Okay. So we take the CPI, we take the PPI, and that gives us what we need to calculate the inflation as measured by the consumer expenditure deflator, PCE deflator, so called. And of course, that's the measure the Fed has historically used to gauge the appropriate monetary policy, the up to 2% of inflation target. What do we think this all means for the consumer expenditure

deflator when we get that data next. Is it next week or the week after? It'll be two weeks, so the end of July. Two weeks, right, right. is when we'll get the June increase. And what is it going to say? So it'll be not as dramatic of a decline in headline in headline PC. That'll be a 0.1% reduction. And the core PCE, so excluding food and energy, is expected to be a 0.2% increase.

Okay. So what's underlying consumer expenditure, inflation is measured, what's underlying inflation as measured by the consumer expenditure year over year, top line? Because that's what the Fed targets. I'd say 3.5 there with just as much confidence. Yeah.

So even with that, you have a reduction coming from energy prices. We're expecting a 0.1% decline in the PC deflator. You're still at 3.7% year over year-year given that monthly projection. And that's down from 4%. Don't expect any relief. Core. Core PCE will be closer to 3%. I mean, with June's projection, we'll be at 3.3.

But if you push it forward a little bit, some base effects helpful for Core PCE, you're settling near 3%. Okay, well, let's say, we're going to end this part of the conversation with talking about what this means for the Fed. And let me turn to you, Chris. So you heard these inflation numbers. You heard Matt's estimate of underlying inflation,

PCE deflator underlying is three and a half. CPI is, I think you said three, right? No, close to three and a half for CPI as well. So three and a half percent is kind of where inflation is. And target is two. What does it mean for the Fed, Chris? I think at next meeting they're just sitting on their hands, right? Sitting on their hands.

Even with those inflation statistics. Even with those inflation statistics. I mean, they're, and the stats at this point, their rearview mirror, right? So I think they're focusing on what's going on with oil prices, the Iranian conflict. So I think that will be a larger determinant of their behavior going forward. But I think for now they sit and wait. Yeah. Marissa, any different view on that one?

No, absolutely. Not. I think they'll keep rates study. Okay, Matt, I'm going to put you on the spot. What's underlying inflation is 3.5% today. That's June. That's mid-20206. What's it going to be at the end of the year?

3.3? 3.4? Oh, that's pretty precise. Oh, boy. Mike, you're writing that down? Yeah, yeah. You should write that down, Mike. because after you, he's the second most accurate forecaster I know.

Mike's definitely the most accurate. Yeah. Okay, what's it going to be at the end of 2027? There, I think it's an energy story. The more I read about a supply gut potential, that's like top of mind. Below, for PC inflation, I think we're closer to the two and a half. You're much improved. Yeah.

Yeah, that makes sense to me. That's very consistent with the four-of-fork. Okay. Okay. Great. Anything else on the inflation front before we move on to Emmeline, Aleph and Mike on the discussion around consumer credit? Matt, anything else? Strong import price data today, which was surprising. We were expecting another decline there. I mean, the U.S. exports a lot of energy, but we import a lot of it too. And the decline in prices from May to June was expected to be, to affect, to result in the negative increase. change in import prices didn't happen. 0.3% increase. A lot of it is a big jump in Chinese imports, which I think is interesting.

It's a lot of industrial supplies. Yeah, so the tariff story is, requires some narrative spinning. But yeah, but it's interesting and I think worth thinking about. Uh-huh. Yeah. And let's bring in our guests,

Emmeline A-Lift from Equifax. Emily, how are you? I'm doing really well. Happy to be here. Thanks for having me on Inside Economics. Absolutely. And where are you hailing from? Are you in Atlanta?

I'm in the Atlanta area, yes. Yeah. Oh, very good. And we saw each other out at the Moody Summit in San Diego. That seems like a long time ago now, doesn't it? Yeah, it did. It was almost two months ago, I guess. No, really?

Two months ago? I think so. Oh, wow. Yeah. Okay. And we also have another guest, one of our colleagues, Mike Brisson. Hey, Mike. Hey, Mark, how's going?

Good, good. It's all going well. And you were out at the summit as well, right? Feels like yesterday. It feels like, and we had an Inside Economics podcast, and you were part of the podcast team along with Chris and Marissa, and Emmeline was there and participated as well.

So Emily, can you just give us a sense of your job at Equifax and kind of a little bit about how you got to where you are today? Yeah, sure. So what I currently do is called the Equifax Advisors, and what we try to understand is taking the microeconomic picture and building that up into a more macro perspective. And I've been doing this for, I guess, the last five years or so. And it had a natural transition from the, during the pandemic. We were trying to understand the massive changes that were occurring at that time, where you had a lot of

the increases in inflation, unemployment, the movements and credit score, the influx into savings and various asset movement that occurred during that time as well, that had huge shifts and credit scores as a part of that. And so we had a necessity to help study that and provide a lot of insights. And through that, our Market Pulse webinar series was born. And you've been a guest on that multiple times with us and participated. And then we've, of course, through that work and research produced our market pulse index. A lot of what we do is surrounded around understanding the, how does the macro economy impact consumers at an individual level and how that builds up.

And prior to that, I come from an analytic consulting background in data science. So I take a much more, a slightly different approach to that where I think math taught me to think structurally and statistics taught me to think and reason under uncertainty, which of course has a lot of comparisons to economics in general. And then when we think about in what we do, the most applied microeconomic perspective is credit scoring. So I spent about a good portion of 20 years or so doing credit scores, leading data science teams, and wrapping that information up and studying the movement. that occurs with connecting really thousands of variables simultaneously and building it up. It's almost like if you're familiar with the mathematical proof by induction, it's like how do we prove it for one?

How do you prove it for multiple? And then carry that through to scale. So I'm coming from a very, very micro perspective into the conversation. Well, very cool. You know, I noticed I was looking at your bio. And I noticed early on in your career, you wrote one main financial. And the reason why that struck me was I was at one main financial yesterday. Oh, really?

Yeah, speaking to the board. I was speaking to the board. Great, great group. Great, great. That was the former commercial credit. When you were there, was it still commercial credit? Or was it one? I was part of the division that got acquired and moved into that.

It was called American General Finance. Evansville, Indiana. Oh, that's right. Yeah, Southern Indiana. And then they end up getting acquired and moving into that. position. But it was it was it was a nice place to get your to cut your teeth in the space because we I had a lot of exposure to you know financial behavior specifically in a more subprime experience. Yeah and I should say Moody's analytics our team and the

economics team and me personally had a relationship with Equifax for I think Emily and I think it's decades now I really do. Yeah. Private Pirates meeting here. I've been. or his 17 years, and it was prior to that. Well, yeah, for many, many years. And we've worked together closely on developing data to assess the state of the consumer balance sheet, particularly on the liability side. And actually, Mike, Brisson has been very involved in that work more recently.

And so it's good to have you on Mike as well. And, of course, I didn't introduce you, Mike, because everybody knows you. You're regular on the podcast, but anything else you would like to. Oh, and you got promoted. And now congratulations. And now you're like a consumer guru, our consumer guru, right? Would that be a good way of putting it? It's funny how things change overnight.

Yeah, right. Started that student loan expert, moved to autos and all coming together. It's all coming together. Well, it's good to have you on board. Okay, well, let's dive in. So, Emily, kind of a broad, open-ended question. How do you feel about the state of the American household consumer, you know, from their balance sheet perspective, from, you know, liabilities and debt?

How should we be thinking about that? How do you feel about it? So I guess the way that I look at it is the biggest takeaway for me is looking at an average or thinking about it in that way is. it feels like it's almost practically impossible now because you have experiences. So when I'm coming at it from a micro perspective, you have individuals experiencing the same economy very differently. And that with respect to the things we've been studying at a consumer financial behavior level across dimensions, that firm case-shaped economy has really been something that we've

been observing directly with the data. And it's not just from. a hypothesis or conjecture, we're seeing it across dimensions and especially across dimensions tied together at a micro level and it's scaled up. So you are a proponent of the view that the consumer is case-shaped. The idea being that folks that are well-to-do, higher income, presumably higher net worth, they're doing just fine, no problem, and that everyone else is having more financial difficulty. Is that your kind of perspective broadly? Yeah. So the way that we've been looking at it is we found some very clear inflections and separation points. And we've separated the groups into, I guess,

going back to the data studies that we've had since 2021, really. And that's just when all of our data connectivity was most available and then pulled through to today is the bottom 20% we're referring to as the strivers. And I would think about that as by income, Emily, the bottom of 20 percent? It's 20 percent across dimensions. Across dimensions. Yeah. So the MarketPulse Index looks at wealth and assets from a liquid wealth and asset perspective. We look at credit scores. We look at income. We look at debt service ratios, whether those are positive or negative favorable towards the individual. And even within wealth and assets, there's things like, you know, savings, stocks, bonds, et cetera, that would

build into that. And so if you look at things from a combined perspective, including credit score, the strivers are the lowest 20% if you're converging those from a variability standpoint on the lowest end across dimensions. And then the thrivers is the top 10% across those same dimensions. And then what do you call the folks in the middle there? I guess we've been referring to them. We have various names that we've been looking at, but right now we're calling them the pivoting middle because there's been so much movement. But if we look back, you know, specifically going back the last six quarters or so, we've seen an increase in the striver population by 11% and the thrivers over 30% in terms of the groups that are sitting there. So the expansion is on both times. Can I just stop you for a second? Sure. Just let people get their minds around.

Let me get my mind around what you're doing and saying here is. So you have all of this data at an individual level. You know, you know something about me. You know something. You know a lot about Mike. Chris, no one knows anything about Chris. I'd be surprised if you have any information on Chris. But, okay, you may have some information about Chris.

And you say, okay, I'm looking at their score. their credit score, I'm looking at their assets, I'm looking at their liabilities, I'm looking at their income, so forth and so on. And then you create this index based on all of these, you're calling these dimensions, these dimensions,

and you then create a distribution across all the individuals. And you say the folks in the bottom, 20% of that distribution of scores, of that market pulse index, you're calling those folks strivers. That's correct. They're striving, presumably they're also struggling, I guess, to some degree, but that would be kind of a loaded way of describing them.

There's strivers. And you're saying the folks in the top 10 percent, you're calling them thrivers. And then everyone else is kind of the pivoting middle. And you're saying that's pivoting one way or the other. They're going north or they're going south. And that's why you get this, when you say up 11 percent for the strivers, up 30 percent for the thrivers. that's that the pivoting middle, they're bifurcating into these,

into the tails of the distribution. Do I have that right? That's right. You did. Yeah. And to add a couple more things of flavor to that is the, the middle population, if we go back since Q, I guess it's Q3, 2020, um,

we, we have seen that drop by 6%. And then so that's where the expansion in the top and the bottom end has come from. Where did you, what was the decline in 6%? Where did you, where was the decline in 6%? Where did you? The last six quarters.

Oh, the middle section has declined by a net 6%. Oh, so the middle was hollowing out is what you're saying. Yeah, it was, yeah. It has been overuse. For the first quarter of this year, it remains constant. So there wasn't continued expansion, but there's movement that occurred because if we look at that, the thriver population on the top end, reduced by 5%. And then the bottom end continued to expand out by, 2% and a lot of the top end drop was do the where the equity markets were at the time.

Right. And why that cutoff? Why strivers 20% of the population and thrivers 10% of the population? I know that's based on your score. Why those cutoffs? I guess I'm asking. I guess we've seen some, some, I guess very, some of it is alignment to the industry. It's specifically, you know, some stats that we've seen, even you put out with respect to what's happening the top 10% of the most affluent, and they're accounting for the majority of the spend, for example. But we also did see a very clear separation in the data where once you got to that 10%, there was a clear movement that you almost like when you get there, you can almost stay there because your wealth and asset profile allows you to continue regardless of any form

of setback or inflationary pressures and things like that. Hey, Mike, do you look at the market pulse index in your work? Are you looking at that? No, I don't have a direct look at that with our partnership. Maybe we should start looking at it. Chris, do you look at the market pulse index? Same. I do not. You do not, yeah.

I guess I'm interested, though. Certainly we'd like to. Right, right. So, but Emily, in aggregate, if I, I know you don't, you said it's hard to look at the averages, but, you know, if you did look at the aggregate economy, how would, how would you characterize it from the perspective of the market pulse? What, what's it saying to you? I would say that the experience is divergent. It's very, very divergent in terms of like the, that overall picture. And I'll take it back to kind of an anecdote. You know, I mentioned as we

were just like, you know, kicking off here before we started doing, doing the recording that I grew up been the Gary Indiana area. Yeah. And, you know, oftentimes when, when, you know, someone will ask me and, you know, they'll say, do you think we're in a recession, not in a recession, et cetera? And oftentimes I'll just, I have a little grin and I'll say, there are people that I know who have been experiencing a personal recession for the last 50 years. And then there's people who are experiencing a personal, you know, I guess high levels of gains during that time as well. So I think the experience is very divergent. And I would say that if you are sitting in the lower end of the, I guess across low income, low credit score, very low wealth and assets, and then you're more likely having a struggling environment. And that would even be an indicator. For example, like, you know, credit score is not, you know, you could have a high credit score and still be sitting within a, the striver population, which is, it's almost like a definition of what it means to be experiencing subprime, because if inflation continues to rise,

and if you have a credit score, maybe you'll be able to qualify for some additional things to obtain more liquid credit if you needed if you run into financial struggles. But that starts running out over time. Okay, Mike, let me turn to you. You look at the Equifax-based credit file data that we get every month, and that gives us very detailed data, but it's more macro. We don't have this breakout by dimension that's available in the market polls. But delinquency rates, amount of debt outstanding, by score ban, by region of the country, lots of different dimensions to the data. How, I'm the same question.

How, looking at that data and everything else you look at, how would you care of? characterize the American household from the finances of the American household? I'd say it's stabilizing. I mean, there's really... Stabilizing? Stabilizing? Yes. So we saw a large rise. I like to focus kind of on the bank card in auto segments, and we saw a large rise in the delinquency rate coming out of the after the pandemic when delinquency rates went way down when there was all the fiscal stimulus and accommodations for borrowers. So you saw a pretty large rise, but that happened two years ago now, the real large rise. It had been very stable since. I think we found a place

where the delinquency rate is kind of where the banks want it to be. We've had increase in the lending standards, which means that a lot of loans out there are good loans. So I'm not really too concerned from a macro perspective of for the consumer. We've seen spending remain high. We've seen the debt to service ratio remain low and come down. A bank card delinquencies have come down over the year. So there's a lot of positives I've seen on the consumer credit side of things. There's definitely concentrated risk and a low income, thin credit score borrowers. However, I think in a general sense, doing pretty well. Okay, so, so how do you square the circle with what Emmeline was just saying?

I mean, I listen to Emmeline, and I'm hearing, well, the distribution of household finances is skewing. It's bifurcating. You've got an increasing number of folks that are under significant pressure, and it's an increasing number of folks that are doing better. the middle is kind of hollowing out. That doesn't feel like stabilizing. And then you're saying stabilizing. How would you square those two things?

From a macro perspective. I'm trying to create a food fight here, as you can see. A little bit of a food fight. Come on, throw a little bit of cauliflower over the wall. From a macro perspective, if things were getting that bad for across the board, the debt service ratio will be going up, not coming down. and we've seen the debt service ratio continue to come down

over the past couple of... Okay, explain what the debt service ratio is. So that's how much it takes of someone's income to pay their dollar debt. To service their debt, to meet their interest in principal payments on the debt.

Yes. Yeah, Chris, what do you think of that? I'm going to let you be way in here. So what do you think? You got Emily on one side of this and I think I'm characterizing this correctly correct me if I'm wrong, but Emily, Emily sounds a little more

nervous and worried about the way things are going. Mike, you know, Mike, not so much. Where would you land in this kind of discussion? Well, first I'd say that we love wordplay on the podcast. So Emilyne, thrivers, strivers, and survivors.

What do you think? Oh. Oh, I like that. You can have that one. But along those lines, I agree with Mike from the broad macro perspective. Things are pretty sanguine when it comes to consumer credit. But I'm also certainly cognizant. There are these distributional effects.

And I don't know if it's just pockets of risk. I'd say there is skewness in the distribution. I don't think it's enough to take the economy down. But you certainly have folks, with low wealth or low income, who are really struggling with higher levels of inflation and they're turning to credit. So you do see student loan delinquencies

or FHA mortgage delinquencies up at very elevated levels. So I'm certainly concerned about that, but not from a macro perspective. Just as I look across households, there is bifurcation that I see. Yeah, Bruce, you want to weigh in here? Yeah, I agree. I think undeniably there's a big difference

between the top of the income distribution in the bottom, in both in terms of performance and in terms of sentiment, in terms of their, you know, just look at the wealth they've accumulated or not accumulated in the last five or so years. So they're both, I think they're both right, right? I mean, from a macro perspective, as Chris said, I don't think I'm extremely worried about the overall health of the economy because of just looking at the top line.

numbers, but as Emmeline said, I think that's increasingly difficult to do and ignore, you know, it's becoming increasingly difficult to ignore the detail. One thing that I would add that I think I picked up on with what Mike was describing, when he said the phrase concentrated risk is the part that I really perked up and heard as a part of that. So I do agree with respect to things coming from a stabilized perspective when we're looking at the averages. But when we look at, for example, credit score, and you look at credit score alone, if you go back to December of 2019, there were 26% of consumers experiencing subprime credit.

And that's, you know, just consider, say, less than 620 across, you know, a generic credit score. Is that how you define it, 620 score? About that, you know, just from just a credit score. But I would actually define a subprime experience on the strivers now because it's, It's multi-dimensional. But what happened is that 26% of those that were under that credit score dropped to 19%. And so if the delinquencies are holding around the same level, you're seeing that concentrated risk occurring, meaning there are more people, there are less proportion of people sitting in a subprime credit perspective, according to credit score. however delinquencies have remained constant.

If you, and just from like thinking about the math, it's almost like a Simpsons paradox, where you have like the difference in the overall average of percentages where if you're likely to have a delinquency on your credit card, you're more likely to have a delinquency on your auto. And so when we look at the delinquencies across the board, it's concentrating into a smaller proportion of the population, even if the averages are remaining the same.

Got it. You're saying the financial stress is, I guess the word is concentrated, you know, becoming more concentrated. And that stress is increasing for that group, but that group is a smaller piece of the pie, you know. Right. And I don't know. You're wondering about my feelings about it. I don't know if I'm necessarily worried. I think where I'm at is I just know what the data says.

And when I, when I. Spoken like a true data scientist, let me say. Yeah. I was like, how do I feel? Well, I was like, it depends. Are you on this hot end of the bottom? You know, you know, that's why, that's a difference. Maybe economists and a data scientist.

The economists, they feel the data, Emily. We feel the data to our core, except Mike. Mike is very, you know, to the book, very to the book. I get emotional about modeling methodologies. Okay, you're weirder than we are. Okay, we established that. Thank you. See, she's, that's a lot.

That's not an insult. That's a compliment. That's a compliment. Got it. I got it. Let me, Mike, let me push back as I want to do. And I always lose when I push back on you. But let me push back a little bit. So, and I do agree, things aren't falling apart, at least not from the credit data. I mean, delinquency rates have kind of leveled off here, except for FHA mortgage delinquency. That has picked up. quite a bit. And I know there's some issues with regard to change in the FHA program and maybe that's impacting it. But does that give you any concern? FHA, by the way, is that's the, those are loans, those are government loans made to folks that are generally first-time home buyers or lower income households and have lower credit scores and put very little down. And so they're most at risk. And so if there is going to be stress, you expect to see it there, at least first. And you have seen some.

some increase in credit problems in the FHA book. Any reason to be nervous about that, Mike, or not? I'd defer to Chris on the housing piece of it. I intentionally did not bring Chris into this. Okay. We're talking about those. Yeah. On Chris, talk auto zone.

Yeah. So I'm not too concerned. I think it's a small pocket. I know mortgage is the largest segment for the consumer. I was more concerned about the student loans, those really spiked when we had the repayments again, but they've come down. So I'm not really too concerned.

I mean, the total debt's growing 1.7% over the past year. It's slower than incomes arising. So I think people can pay off the debt that they're taking. For the housing side of things, I would be concerned if we start to see home value start to decline. rapidly or any meaningful way. I know there's different areas. But they are declining, right?

I mean, in the south and the west, they're declining. I mean, nationwide, they're flat, basically. So definitely there's areas where they are coming down, but nationwide, they're pretty stable in comparison. Yeah. But how the country's experiencing price declines, right? I mean, if the national price, I'm just, you know, obviously waving my hands,

but, you know, the national house prices are basically fat. So we are seeing some pretty significant price declines in different parts of the country. No? Yes. Yes. Yeah. Right. All right, Chris, go ahead.

Why shouldn't I be worried about the FHA mortgage delinquency? Oh, to Mike's point, it's a small portion of the total mortgage pie. 25%, I'd say, 30, 25, 30%. And I think it's more of like a canary in the coal mine. You know, sure. Yeah, okay. Sure. I agree with that.

And you did mention that there have been changes. in the servicing of FHA loans. Yeah. A lot of FHA loans were essentially getting a free modification, kind of extending out or pretending. Right. Along the delinquency spectrum. So if anything, right, had that's, had today's servicing rules been in place, we would have experienced higher delinquency rates for a longer period of time and we wouldn't have seen the spike up, right? It was just we would have probably would have seen more foreclosures earlier on.

So we're just kind of catching up here. So that's something to bear in mind here. But you are right that that is the segment that is most sensitive. Right. These are borrowers. Right. Not only are they low credit score, but they have very low down payments when they get these loans. So if they originated a loan just a year or two ago and prices are coming down in their area,

they could very well have negative equity, right? So if anyone's going to feel that the pain first, it's these borrowers. It's not the borrower who got their mortgage 10, 15 years ago, right? It was built up a huge amount of equity. it's someone more recent with more limited credit. So definitely worth watching and trying to tease out what the impact is of the servicing versus the true underlying delinquency impact. And once you do that, you do see that these delinquencies are going up.

So there is some signal there of some stress, particularly in these markets with lower house prices that you talk about. Yeah, the other stat that comes from the Equifax data that I just throw out and get curious how you respond to it, is if I look at the delinquency rate on subprime debt. And Emily, I'm defining subprime debt with the score below 660. I just pick 660. We could look at 620, but I looked at 660. And across all product lines, across cars, auto, student loans, mortgage, the whole shoot match, percent of dollars outstanding.

That is now just about 10%. So 10% of all the subprime debt outstanding is 30-day and over delinquent. That's of June. And that's pretty elevated. I mean, you know, you have to go back to just after the GFC when delinquency rates are declining to see a delinquency rate that high and certainly above kind of where we were pre-pandemic. So, Mike, back to you. How do you think about that?

Does that sign of stress or am I overstating the case? case? Both. Both, okay. I'm wanting to do that, by the way. It's definitely a stress. I think we've nailed that down. It's concentrated. There's stress at lower income levels. However, there's a lot less people below that 660 marker in terms of the distribution of lending that there was prior to the financial crisis. people have just, there's more loans going out to those in the higher credit scores than there were before. So I think it's overstating in comparison with where we were going 2007, where there's a much higher population that less than 660 that we're getting more loans. However, there's definitely concentrated risk. So both ways. Okay. All right. So to summarize the collective wisdom of the group is, yes, there is some bifurcation of financial.

performance, there's the folks that are struggling and the folks the well to do, and the middle is kind of moving in one direction or the other. So that's not great and certainly a sign of stress. And if you look at the credit statistics, same deal, some signs of stress, but not, it's not to the level or to the degree that is becoming a macroeconomic, you know, a problem, you know, an impediment to the consumer in aggregate. Is that anyone disagree with that? Marissa, you're on board with that characterization? Yeah. Emeline?

I do agree. It's individuals that are struggling and there may be portfolios that are struggling. Right. And Chris, you agree with that? Yeah. Yeah. You're shaking and said yes. And of course, Mike, well, I don't know.

Mike, you agree with that as well? That was perfectly summarized. It's perfectly summarized. Perfectly summarized. Okay. All right. Well, let's, I want to play the game. I want to end the podcast with the stats game.

before I do that, though, Emilyne, anything else you want to add to the conversation before we move on and play the game? Yeah, I think the main thing is the big story for 2026 isn't just the 18.2 trillion total dollars or the delinquency rates. It is with respect to that the various concentration. And the main drivers behind it are going to be the financial stability is more often defined. by the assets you hold in addition to your income and ability to generate those assets on top of the credit score. So she already started the game, $18.2 trillion. That's not my stat, though.

Yeah. I'm not giving it away. That's a total amount of household debt outstanding according to the Equifax credit file data, correct? Do I have that right? Mm-hmm. See, Mike, were you impressed by that? No, not really. He wasn't really.

We haven't started playing the game yet, Mark. Oh, sorry. Oh, sorry. We're going to play the game. The stats game weeks before the stat. The rest of the group tries to figure that out with clues, questions, deductive reasoning. The best stats, one that's not so easy that we get it right away, one that's not so hard we never get it. And if it's apropos to the topic at hand, which is, doesn't have to be, but pretty clear topic. Let's go around. All the better. And we always, Emily, I'm sorry. We always bring with Marissa. It's tradition, as you know, because you're a longtime listener of Insuff. side economics. We'll begin with, Marissa. What's your stat? My stat is 53.3%. 53.3%. That's the odds of Spain winning the World Cup. Oh. Maybe, but...

Is that, Chris, is that the odds of them winning the World Cup of Court? I don't know. I don't know. Is it the increase in spend from travel and leisure because of the World Cup? No. Is it related to the World Cup? It's not related to the World Cup. Is it based on data that came out this week? This is data that's updated every day.

Oh, every day. It's a percentage. 53.5%. Is it a probability or odds, like a prediction market? It's the probability of something. of a Fed rate hike at the next meeting? Yeah. Not the next meeting.

Oh, September's meeting. Sorry, yeah, September's meeting. Yes, that's right. Oh,

okay. That's an interesting one. So by the September, there's a meeting coming up here, I think, in a couple weeks. In a week or two weeks. And odds are probably well below 50% for that.

They're like 10% for, yeah. And there's, and markets, and this is from what, the CME or a few? futures markets or something from a fund? Okay.

You're saying a 50, the futures are signaling of 53.5% probability of a rate hike by September. Yeah, 53.3. What do you think of that? Well, it's interesting because it's way down, right? The odds were much higher before we got the most recent read on inflation. But it kind of goes back to the consumer credit, right? Because one thing we didn't really talk about much was interest rates. and how consumers are faring in a higher interest rate environment.

And we're looking at a potential situation coming up here where we may even be facing higher rates. A year ago, we were talking about lower rates and somewhat of a relief valve for the mortgage market, the housing market, all of this, right? But now because of the war with Iran, we're facing potential higher rates. Right, right.

Oh, that's a good one. That's a really good one. Okay, Emily, do you want to go, do you got the hang of it, Emily? I've got the hang of it. Yeah, yeah. You want to go next? Yeah, sure.

So I guess the stat that I have, if I may, provide it in two parts. Sure. No, that's against the rules. No, it's not. Is it against the rules? But I think you might need it. I think you might need it. All right, go ahead.

If you want to go with just the second part. I'm only pretty happy. The overall stat is 17.9. but I want to give you the next layer down in true bifurcated form. 12.6 and 5.3. These are percentages? Percentages. Oh, so the total is 17. What did you say?

17.9. And it breaks down into... 12.6% and 5.3%. And it would be very unfair if this is a market pulse statistic. Is it a market pulse statistic? It is a market pulse. Oh. Well, you got it then, right? Oh.

That was a good guess. I got it? What is it related to? What is it? What is it? Was it relate to? Oh, man. So it's distributional. It's some part of the population is in these buckets.

I don't think we're going to get that, Emily, to tell you the truth. Should we get it? I mean, do you think we're, we should get it? Strybers. Intuitively, if we spent enough time. on it, I think you guys would naturally get it, I think. Oh, okay. We're going to let you go ahead.

Tell us what it is. Put us out of our misery. So there are 17.9% of individuals that were in the middle class that were we're calling the pivoting middle. 12.6% of U.S. consumers moved down and 5.3% moved up in the last six quarters. Okay. This goes back to our earlier discussion. You're saying this is a pivoting middle. and the hollowing out of the numbers.

So the number's a little bit bigger, that's 17.9. So there's movement to the outer tails, but there's also movement back inward for a net change of that 6% that I described as the net reduction over that same time. Let me ask you, looking historic, and you may not have done this,

but I'm just curious, because this might be something to watch. I mean, historically, when the share of the population that strivers rises above a certain level, or the thrivers decline below a certain level, does that signal something about the macro economy? Is it a good leading indicator?

That's a great question. I think the thing that we've observed the most is that when we index inflation to itself, so think about indexing inflation from a year-over-year change. So in essence, that's a acceleration. So it's an acceleration or the second derivative to get really nerdy of inflation is highly correlated to,

I guess it's the first derivative of that change for the Market Pulse Index. So what is the velocity of change for Market Pulse Index is highly correlated to that multi-change from inflation? Oh, okay. You're saying when inflation is accelerating, then you see more of this bifurcation going on. Yeah. Okay. So if you're meaning like, so if we look over the last five years, holding over 3%, that's going to impact things more dramatically. And that's why we do see that's 12.6%. moving down. Right, right. I guess that makes sense. That's reasonable. Yeah, cost of living rises and people, lower income households in particular, will start to struggle. But okay. Oh, that was a good one. Mike, do you have a good one? Maybe.

Far away. Six point seven percent. Is that in the Equifax credit data? No. Is it an interest straight. Economic view to this week. Oh, it's a fixed mortgage rate. Yeah. Nope. No?

No, it's not it? It is 6.7%. 6.65. 6.65. But that's what you had in mind. Is it credit, is it credit related? No, it's consumer related. Oh, is it related to retail sales?

Yeah, retail sales. Got it. Go ahead, Mercy. You leave the way. So a percent change year ago and retail sales. So that's for all retail food services. That's kind of boring. It's kind of nominal, right? Nominal, yes. But without autos and gas, it's still 5.7%. So it takes out most of the inflationary pressure because you take out the gas purchases there. So I think it's just a sign that

consumers still are spending, consumers are still doing well. I don't know why you keep saying they're doing well. I mean, real consumer spending growth, I'm picking on you, but, but, Real consumer spending growth is 2% on the nose. That's what it's been, is what it is. Is that well? That's not bad. It's okay. It could be worse.

It could be worse. But if it's 2% and you have a case-shaped economy, that means the folks in the top part are doing four, the guys where everyone else is doing zero. That's not good. I mean, consider we just went through a war. We just had tariffs raised. I don't think things are going pretty low.

The war's still ongoing. I'm just, yes. Yeah. I don't know. With all these headwinds, I still think this is pretty strong. Really? Okay. I'm going to have to dissuade you of that view. I don't know. I agree with Mike. I mean, I would have expected it to be a lot worse, given everything over the past.

You know what the tax cuts and all that kind of stuff? And the World Cup? We had a World Cup. World Cup. World Cup is in June. A lot of the World Cup spending was a disappointment. Huh? A lot of the World Cup, like a lot of the expectations for World Cup spending in different host cities was disappointing. Relative to expectations. I haven't heard that.

Really? Okay. Interesting. Okay. All right. Okay. See, Emily, you're lucky you're not Mike. I'm just picking on Mike.

I'm going to pick on Mike. Chris, you want to do one more and we'll call it a podcast? Sure. Sure. This is a good one. It's a double. 2.9% and 13.1%. in the credit statistics

yes in the Equifax related credit statistics one of them is Equifax huh one of them and what are the two of them again 2.9 and what

2.9 and 13.1 are they delinquency rates they are mortgage and student loan nope but but the 13.1 is not equifference

facts. One is not as a tax. 13.1. That's pretty high. Yeah. I did look at the CNBS delinquency rates, the commercial mortgage-backed

securities. I think that's close to 10 in rising. That's not 13. It's consumer-related, Chris? It's actually the same product. Is it mortgage?

Total and mortgage-credit card. It's credit card. What's that? I'll ask if it was mortgage. It's not mortgage. Subscries through credit score band. Is it credit card?

score ban? No. No. No, he said they're from two different sources. I think I think it includes whether or not you are examining delinquencies alone or if you're including write-offs. Well, it's the New York Fed data is what he's saying. The New York Fed. Oh, this is great. This is really good. I want to explain this, Chris. And then I want Emily and Emily to tell us what she thinks of this. Go ahead. So this came out today, or it came out this week, actually, were surfaced this week because a lot of the banks reported their earnings this week, J.P. Morgan Bank of America. And they showed very low, stable, uh,

delinquency rates on their credit card portfolios. Right. But if you go to the New York Fed data, which is very popular, it gets released every quarter, it showed a 13.1% delinquency rate, right? For this is for the first quarter of 2026. So went at, went to, uh, the Equifax data, the credit forecast.com data, I looked at 90 plus day delinquency rates. And that was 2.9%. So a huge difference between the two. And the reason for that, there was a lot of discussion. I actually talked to some journalists about this as well. The reason for the difference is that the Equifax data that we've been talking about really takes more of a lender view, right? So when a loan actually is charged off of the books of a lender, it comes out of the portfolio.

And we're only looking at 90 plus day delinquencies out of the currently active set of loans. The New York Fed approach is more of a consumer view, right? They are not excluding the bad debt, the debt that is charged off because technically the consumer is responsible for that debt, even post charge off, right? If you don't pay on your loan, the bank may charge it off, but that gets sold to a debt collection agency and that debt collection agency, as we very well know, we'll continue to pursue that debt for some time. about, oh, actually they can continue to pursue the loan forever. After seven years, they're no longer allowed to sue for it. It comes off the credit report data. So the bottom line is you have these two measures, which sound very similar.

They're both 90 plus day delinquency rates, but they're taking different approaches, and it does inject quite a bit of confusion in the market. What do you think of what the New York Fed is doing, though? I mean, bottom line. I mean, it feels pretty bogus to me. Yeah, I'm not. In terms of trying to understand. what's going on with the consumer today.

I mean, if you go back seven years ago, seven years ago includes the pandemic. I mean, come on. Exactly. Yeah. I'm not a fan of that approach. Not a band. Very little of that data.

You know, the reality is very, very tiny percentage of that charged off loan amount actually ever gets recovered. So in the minds of consumers, I don't see them as thinking that they will, that they are going to pay that debt back, right? Emily, I'm going to give you a chance to be critical. call of the New York Fed. I think they have a different purpose is how I would describe it. Much, much like the, you know, thinking about, like, because, you know, just adding up data and data, it's like, what are you including in your numerator and what are you including in your

denominator? And I think the more important part is under, like, having that understanding of what question you're trying to answer and which statistic is most relevant to address that. So, in essence, if you are trying to, as we've been describing, what is the overall, um, thinking about it from a macroeconomic perspective risk as it elevates into, you know, bank stability, for example, likely to remove the charge-offs after they've been reported for that, you know, the most recent time periods is an indicative version of that. But if you are trying to examine it from a very more granular perspective, knowing that it does impact an individual-level consumer and their credit score for those seven years that Chris described, there is some level of impact to that. So I think

the, it's really just a different purpose. Yeah, I think it's bogus. Yeah, I mean, come on. You're trying to understand what that is going on with the, the way it's being used. The world is using it, it's trying to understand what's going on with the consumer today. Is there a problem or is there not a problem? 13.1% says we've got a screaming problem. We've got depression-like conditions.

And that's this, Mike will tell you, just not right. So come on. That's just bogus. You know, the other thing that makes me so annoyed with the New York Fed data is a small sample, right? I think they based it on a 5% sample, which is okay for the aggregate level of delinquency. But when you start trying to break it down by a different group, score ban, region, product line, whatever it is, 5% doesn't cut it. It just is wrong. We know that because we have, because of the Equifax data, thank you, a sense.

of what's going on. We have a much clearer sense of it. So I don't know. And I should I should always send you. I had a long email back and forth with the New York Fed about this about three, four years ago. And I'm going to publish it just so people can see that, you know, see it. I just think it's just misleading. In fact, I'm so annoyed that I've thought that I'm going to now pick the top five statistics that people should not look at. to try to gauge what's going on. And this is going to be my – I'm soliciting – by the way, I was going to go solicit everybody for their statistic.

I think this is a good idea. Don't you guys think – good idea? Top five statistics. What you should not be looking at, this would be on the list. I don't know if it's number one, but it's certainly the top five. Anyway, you got me going. That was a great one, Chris. That was a great one.

Yeah. Pushed a button. Wow. Pushed a button. Yeah. Now we'll get a call from the New York Fed. No, no, they won't. They, you know, they're good.

They know my position on this. I made it pretty clear. So anyway, Emily, thanks so much. Mike, thanks so much. And guys, anything else before we call it a podcast? Marissa, anything? I think so. Chris, I hope you guys have a great weekend.

Go, who are you guys rooting for in the World Cup? It's hard not to root for Argentina, isn't it? It's kind of hard not to. I'm just rooting against smoke. So, yeah. Where is the game? Is it a game in New York? In New Jersey.

Yeah. Oh, goodness. That's not good. That's not good. Hopefully this clears up. Anyway, we're going to call this a podcast. I hope you enjoyed it. Dear listener, and we will talk to you next week.

Take care now. Bye, bye.