Moody’s Analytics chief economist Mark Zandi has cautioned that while the US economy continues to grow at about 2% annually, driven by business investment and AI spending, weakening consumer finances are flashing warning signals. In a post shared on social media platform X (formerly known as Twitter), Zandi wrote, “The raft of economic data released last week isn’t sending off red flares, but it is sending off yellow ones.” Zandi also pointed to the falling real disposable income and a historically low savings rate as signs of stress. He also stressed on the fact that disposable income rarely declines outside recessions, making the US GDP, he also warned that household financial cushions are shrinking, leaving the economy vulnerable.
Read Mark Zandi’s complete post here
“The raft of economic data released last week isn’t sending off red flares, but it is sending off yellow ones. No red flares because real #GDP is still growing at a 2% pace, with AI and corporate tax cuts powering business investment. But yellow flares because consumers struggle to maintain their spending. Adding to the concern is the fall in real disposable income — the fodder for future spending — which rarely happens outside recessions. And the saving rate is seldom lower. With consumers accounting for over two-thirds of GDP, and business investment less than one-seventh, those yellow flares are getting brighter.”
Growth driven by AI and investment
Despite consumer weakness, Zandi noted that AI-related investment and corporate tax cuts are helping sustain growth. Business spending remains strong, supporting the 2% GDP expansion. However, he stressed that business investment represents less than one-seventh of GDP, underscoring the economy’s dependence on consumer spending.
Market risks and other warnings
Zandi’s caution comes amid broader concerns about U.S. economic stability:* Jeremy Grantham recently warned that U.S. stock valuations are at record highs, with the Buffett Indicator at 235% of GDP, signaling extreme overvaluation.* Anthony Scaramucci argued that AI could significantly boost long-term productivity, potentially easing the debt burden if gains outpace government spending.* US growth slowed sharply to just 0.5% in late 2025, with inflation and weak investment weighing on households.
Mark Zandi warnsUS economy is becoming “increasingly” unequal
Recently, Mark Zandi, chief economist at Moody’s Analytics warned that America’s economic divergence remains ‘firmly intact’, with newly updated data showing the bottom 80% of earners losing ground against inflation while top earners dominate national consumption. Zandi’s estimates reveal that households in the top 20% of the income distribution — those earning over $175,000 annually — now account for nearly 60% of total spending. Their personal outlays surged 6.5% over the past year, well above the 2.7% CPI inflation rate. By contrast, spending among the bottom 80% grew just 2.6%, meaning most consumers fell short of inflation. “The financial system is becoming increasingly unequal, leaving most Americans upset with their financial situations,” Zandi said.
