Household nominal disposable income increased by 4.4 per cent YoY in Q4 2025, supported by moderating employment and nominal wage growth. Real disposable income growth increased 1.6 per cent YoY in December 2025, a significant decrease from 2.8 per cent in 2024, due in part to a softening labour market, Fitch Ratings said in a press release.
Nominal wage gains for higher-income households are now outpacing those for lower-income households, reinforcing the K-shaped narrative—especially as inflation hits lower-income households harder.
“US consumer spending has been surprisingly resilient since the second half of 2025 as tariff concerns have receded,” said Olu Sonola, head of US economic research. “Fitch projects consumption growth to average 2.6 per cent in 2025 and ease to 1.7 per cent in 2026. While the Fed will be keeping a close eye on the labour market, we foresee two rate cuts in 2026—an outlook consistent with inflation that is likely to stay above 3 per cent.”
Consumer net worth increased by 3.5 per cent YoY in 3Q25, primarily due to continued strength in the equity market. Net worth reached record highs at the end of Q3, which was likely responsible for a consumer spending tailwind in 2025.
Household debt-service burdens were broadly unchanged in 2Q25 from the previous year, at 11.3 per cent of disposable income. The debt service ratio remains below its pre-pandemic level of 11.7 per cent, suggesting households have been largely insulated from the rise in the fed funds rate.
ALCHEMPro News Desk (SG)
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