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The K-Shaped Consumer Is Converging — and the Data Points to Tailwinds Ahead

The Rithm Take

The prevailing view on the consumer is one of sharp divergence between lower- and upper-end households, a narrative fueled by data on rising card delinquencies. But a shift appears underway — across wage gains, improving early delinquency trends, and better debt management among weaker-credit borrowers. Tailwinds point to strength ahead.

The Consumer Backdrop
Wages, hiring intentions, and manufacturing are all firming together, while staples spending holds steady.

Slide1

The K-Shape Is Closing In
Lower-income households are now out-growing middle-income households across spending, wages, and employment — the core convergence signal.

Slide2

The Delinquency Headline Is Misleading
The "worst since the Great Recession" card delinquency stat is a reporting artifact, not a sign of new consumer stress. 

Slide3

FHA Early Delinquency Rates Are Falling
FHA borrowers, among the most credit-sensitive in the market, are seeing early delinquencies fall back toward long-run norms.

Slide4

Three Different Lenses, One Emerging Direction
Three independent data sources — spending, savings, and payment performance — all point the same direction, even though shock-absorption capacity still isn't equal.Slide5

Emerging Trends: Strong Tailwinds Ahead
AI-driven capex and a rotation back toward goods demand set up the lower-end consumer to benefit most from here.Slide 6 (1)

Authors

  • Satish Mansukhani Managing Director, Investment Strategist
  • Alan Wynne Vice President, Investment Strategist
  • Boubacar Basse Risk Analyst

For any further questions about Rithm Capital or this article, please reach out to ir@rithmcap.com. This article is being provided for informational purposes only. It may not be reproduced or distributed. No representation is made regarding the accuracy or completeness of the information contained herein. Nothing contained herein constitutes investment advice nor an offer of securities.

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