Hard Data vs. Soft Warnings: What the Latest Economic Signals Reveal About U.S. Consumers in the Second Half of 2025

Highlights: 

• U.S. consumers show a dichotomy between softening sentiment (soft data) and stable credit performance, employment, and GDP (hard data).

• Despite cautious consumer sentiment and increased scrutiny from lenders (leading to tighter lending standards), overall credit card delinquencies have improved.

• The economy is becoming increasingly "K-shaped," with some consumers thriving while others struggle, as evidenced by diverging credit score trends and increased student loan delinquencies.

As we cross into the second half of 2025, the U.S. economy is presenting a puzzle of contrasts. On the one hand, consumer sentiment is softening and confidence indicators are signaling caution. On the other, hard data—credit performance, employment, and GDP—remains remarkably stable. In the July 24 Market Pulse Podcast, I sat down with Economist Amy Crews Cutts, President at AC Cutts and Associates, and my fellow Equifax Advisors panelists—Maria Urtubey, Emmaline Aliff, and Dave Sojka—to make sense of this disconnect and explore how economic conditions are playing out at the household level.

Soft Data: What People Feel

We opened the episode by discussing soft data, which includes consumer sentiment surveys like those from the University of Michigan and The Conference Board. Recent results of these surveys show a decline in optimism. Consumers are less positive about business conditions, employment prospects, and future income. This dip in sentiment is significant because it often precedes behavioral shifts—such as reduced spending or changes in credit usage.

Amy expanded on this point, emphasizing that soft data has shown consistent weakness across a range of surveys—whether it’s consumer confidence, small business outlooks, or credit manager expectations. Yet these concerns haven’t translated into the kinds of sharp declines in spending or employment we might expect.

Hard Data: A Different Story

That brings us to the hard data, which paints a very different picture. Key indicators like payroll growth, low unemployment claims, and steady consumer spending suggest the economy is still holding up. Even layoff announcements, which have made headlines recently, are more of a leading indicator than a confirmed trend. Many companies are required to announce such restructurings ahead of time under the WARN Act, but these layoffs haven’t shown up in actual employment data yet.

From a credit standpoint, we’re seeing an encouraging trend. Credit card delinquencies have improved for six straight months, helped in part by seasonal factors like tax refunds and tighter lending standards. Cards issued during 2022 and 2023 have been the worst-performing vintages in recent years, prompting lenders to become more selective in 2024 and 2025. The result? A more stable credit environment for all segments.

Interest Rates and the Role of the Fed

We also spent time exploring interest rate dynamics and the Federal Reserve’s next move. While the federal funds rate has held steady, the Fed continues passive quantitative tightening by allowing its massive portfolio of Treasury and mortgage-backed securities to run off. At the same time, global investors are increasingly skittish about economic uncertainty in the United States.

The K-Shaped Economy: Disparities Continue to Widen

I explained that the "K-shaped economy" is where some consumers are thriving while others continue to struggle. Credit score trends reflect this divergence. We're seeing both more consumers improving their scores and more slipping into lower tiers. In other words, the middle is hollowing out.

Maria added further context, noting that subprime lending has contracted, especially in products like bank cards. While auto lending remains somewhat more accessible, even that is tightening. Consumers are buying less and being more cautious—a trend we’ve dubbed a “collective cautious approach.”

Delinquencies on student loans, a growing concern, are also worth watching. After peaking in May, student loan delinquencies softened in June—but with collections resuming and wage garnishments potentially increasing, these numbers could worsen. And given how consumers prioritize essentials like car payments over student loans, the effects could cascade through the broader credit ecosystem.

Looking Ahead: What We're Watching

As we closed the episode, each panelist shared what they're monitoring for the remainder of 2025:

• I am watching how wage garnishment affects student loan repayment and household budgets.

• Maria is tracking housing affordability and the impact of higher rates on loan qualification.

• Dave is focused on auto delinquencies, particularly among borrowers with high monthly payments.

• Amy is monitoring consumer spending—especially among higher-income groups, who are now expressing concern.

• Emmaline is closely following interest rate movements and their downstream effects on originations and debt servicing.

Conclusion: Resilience or Risk?

So where does that leave us? The U.S. consumer is showing resilience—spending steadily and managing credit responsibly. But there are clear risks ahead: uncertain trade policy, widening inequality, elevated debt levels, and stubborn inflationary pressures.

Whether we continue to power through or face a slowdown will depend on how these forces evolve—and how policymakers, lenders, and households respond. As always, we’ll be watching the data closely. 

Stay Informed

For more insights or to suggest topics for future episodes, reach out to the Equifax Advisory team at riskadvisors@equifax.com. And don’t forget to subscribe to the Market Pulse Podcast wherever you get your podcasts.

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