Economist Mark Zandi warned that while the U.S. economy is still growing at about 2%, driven by business investment and AI spending, weakening consumer finances and falling disposable income are flashing “yellow flares” that could signal underlying economic strain.
Consumer Weakness Sends ‘Yellow Economic’
On Sunday, in a post on X, Moody’s Analytics chief economist Zandi said recent economic data does not signal an immediate downturn but does raise caution flags about underlying weaknesses.
“The raft of economic data released last week isn’t sending off red flares, but it is sending off yellow ones,” he wrote.
He noted that real GDP is still expanding at roughly a 2% annual rate, supported by artificial intelligence-related investment and corporate tax cuts that are boosting business activity.
However, he warned that consumer fundamentals are weakening. “Consumers struggle to maintain their spending,” Zandi said, pointing to declining real disposable income and a historically low savings rate.
“Real disposable income — the fodder for future spending — which rarely happens outside recessions,” he added, emphasizing that household financial cushions are shrinking.
Zandi also stressed the economy’s dependence on consumers, who account for more than two-thirds of U.S. GDP, compared with business investment at less than one-seventh.
US Economy Faces Market Risk, Slow Growth And AI Hope
Earlier, Jeremy Grantham warned that U.S. stock valuations had reached record highs, with the Buffett Indicator at about 235% of GDP, signaling extreme market overvaluation and raising concerns about a potential correction.
U.S. economic growth had slowed sharply to just 0.5% in late 2025, with weak investment and persistent inflation keeping pressure on households even as consumer spending held up.
Meanwhile, Anthony Scaramucci said AI could have significantly boosted long-term growth, potentially easing the U.S. debt burden if productivity gains outpaced government spending, echoing post-World War II economic expansion.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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