Mexican food is probably gonna’ kill me. It won’t be the chalupas or the tres leches, it’ll be the chips and salsa — you know, the stuff they bring to your table at most mid-priced (or better) cantinas before you order. I can’t leave ‘em alone, especially if the salsa is any good. And if they also bring free queso to the table, there’s a decent chance I’m leaving El Toro Gordo on a gurney.

But as good as those tortilla chips can be, there almost always comes a point where I’m able to push them aside (usually not until my burrito grande arrives, but whatever...). Because, well, even my dad-bod belly has its limits.

There is of course a point to all this: Just like my every-trip to a Mexican restaurant, there comes a point in every economic expansion where the U.S. consumer sits back, pushes away from the table, and belches, no mas. And based on recent data, it’s looking like we might — might — be reaching the belching point.

To set the context, it all started back in December 2020, when the first COVID vaccines started to appear. That’s when my beloved Mexican cantinas (and other businesses, too) slowly began to re-open, and eventually, it started looking like things might really get back to normal. On top of that came not one, not two, but three separate direct-to-taxpayer stimulus efforts designed to get us all spending again. But the re-opening wasn’t uniform: Initially, it was still way easier for us to spend some of that windfall binging on actual stuff online than it was to hop in the “Family Truckster” and beeline for the closest bar-and-grill in the hopes that the dining room was actually open. As a result, spending for goods spiked during the early phase of the post-pandemic reopening even if services spending continued to lag.

Sooner or later, though, the consuming public had all the pickleball paddles, copies of The Settlers of Catan, and toilet paper (remember that?) that we needed, and we started spending for services again: ‘Home office’ and ‘shelter-in-place’ were replaced by drinks with friends and ‘revenge travel’ as the hottest post-pandemic spending themes. And the economic data followed: One of the more interesting elements of the post-COVID splurge was the handoff from goods inflation — which drove prices higher during the initial phases of the re-opening — to services-related inflation (but that’s a story for another day...).

Eventually that spending trend petered out, too (how many times can you visit the Grand Canyon or The Great Buddha before your thirst for travel is satiated?), and spending for both goods and services seemed to return mostly to longer-term trend. And much to the surprise of many of those who watch this stuff closely (me included), there was no sudden pull-back in spending when the COVID stimulus was finally all spent away.

Until, perhaps, now.

Somewhat ironically, the best, most recent evidence we have that the post-COVID splurge might finally be over came to us on Valentine’s Day, when the Census Bureau shocked markets and economists alike by reporting a -0.9% decline in retail spending during January — a surprise we covered in greater detail in last week’s Perspective.¹ Initially, it was easy to hope that this decline might be temporary (or even revised away when a more complete dataset is considered), but then along came Walmart to throw cold water on that theory. On Thursday, the $400-billion-pound gorilla of U.S. retail added insult to injury by warning investors that financial results for the next quarter and calendar year 2026 (which ends 11 months from now, in January), would miss analysts’ expectations by a pretty wide margin.² That sent markets lower for two days straight.

There is of course still at least some reason to hope that this two-leg parlay of weak consumer data might just be a blip. After all, the manufacturing sector (the portion of the economy that produces board games, pickleball paddles and toilet paper), seems to have successfully climbed its way out of an extended funk that corresponded to the cool-down in goods spending when fatigue finally gripped the stuff-buying consumer. The idea of a recovery in the goods-producing sector was brought home to us last week by better-than-expected results from the first two regional Federal Reserve (The Fed) manufacturing surveys for February, one from the Federal Reserve Bank of New York and another from its neighbor, the Federal Reserve Bank of Philadelphia.^3,4 The nascent recovery in manufacturing was also echoed by S&P Global’s flash Purchasing Managers Indices (PMI), which saw manufacturing remain in expansionary territory even as the services economy dipped back into contraction for the first time in two years.⁵

It's also somewhat reassuring that The Conference Board’s on-again/off-again recession indicator released alongside its Index of Leading Economic Indicators is once again set to ‘off.’ For the first time since around mid-2022, The Conference Board’s model isn’t sending either a “warning” or a “signal” that an economic recession is pending.⁶ But it’s important to know that there are other corroborating examples of cooling consumer demand beyond just Census Department data and Walmart's downbeat guidance: Consumer confidence surveys from the University of Michigan and The Conference Board are falling again as fears surrounding both inflation and the employment picture have resurfaced. And last week’s update from the University of Michigan included this gem: Consumers’ plans to buy big-ticket items like cars and appliances are actually declining, even though those are two categories most likely to rise in price if President Trump’s tariffs are enacted.⁷

As we pointed out last week, that makes it harder to argue that consumers are driving an inflationary spiral that would terrify the Fed. But it’s plainly discordant behavior that also does little to soothe fears about a slowing consumer, which might matter more than a Fed who has suddenly resharpened its inflation-fighting knives given how important consumer spending is to overall economic growth.

And if this wasn’t all enough to rattle you just a little bit, I’d be remiss if I didn’t at least mention a rumor that began swirling in financial circles late last week. It seems that a certain well-known slinger-of-wings is suddenly facing potential bankruptcy. The identity of said chicken-wing expert will remain unsaid (this is, after all, a family-friendly publication,) but suffice to say that they employ a business model that might have once been considered, uh, mostly recession-proof.

If you know, you know. And even if you don’t, trust me — it’s probably not a great read for the U.S. consumer.

What to watch this week

The week starts out fairly slow but picks up steam by mid-week, with a few important reads on inflation, housing, confidence, and spending due out before the weekend. But among the most important events will be Wednesday’s quarterly results from Nvidia — the company that epitomizes the AI theme perhaps better than any other. Not coincidentally, Snowflake — another AI darling (but far smaller in terms of market capitalization than NVDA) — will also report results that day, as will a handful of companies striving to be the first to announce viable use-cases for AI within their business models. Watch these and other companies in and around the AI multiverse for indications that trajectory of the AI super-cycle has changed at all. And oh, yeah: For those who still measure economic potential the old-fashioned way, a bunch of consumer-relevant companies and retailers are scheduled to report earnings this week, too (including Home Depot, Lowe’s, TJX, automaker Stellantis, and Anheuser-Busch InBev, among others).

Maybe the most important item on the regularly-scheduled release calendar will be The Bureau of Economic Analysis’ income and outlays report, which includes details about how much Americans are spending and consuming, but also an important read on inflation in the form of so-called Personal Consumption Expenditures (PCE) prices — critical because it informs the Fed’s thinking. Another tidbit inside that report is the savings rate. If the discussion above left you unclear about how consumers feel about the future, scan Friday’s data for any hint of a spike in savings. In the past, rapid increases in the savings rate have corresponded to periods of economic weakness as consumers gird themselves against the potential for nasty things like layoffs and reduced hours. While that might be a perfectly reasonable individual response to an uncertain future, it often portends poorly for the economy as a whole.

Given the renewed focus on the consumer, Tuesday’s update of consumer confidence by The Conference Board probably ranks a close third in terms of what might move the needle. As mentioned above, survey takers are suddenly expressing a darker outlook than they have in the recent past. Some of this is a result of an upward reset in inflation expectations that is in turn related to the burgeoning trade war that now seems likely to extend through at least this summer. But fears about a deterioration in the labor market also began creeping into the data about a month or two ago, making Tuesday’s Conference Board report worth a quick read for that reason alone.

Similarly, Thursday’s weekly jobless claims report is inching its way back toward the spotlight. Ordinarily, this data is too noisy to command much attention on a week-in/week-out basis unless it’s wildly different than economists’ expectations. However, the steady drumbeat of headlines concerning planned layoffs among the federal workforce has created growing interest in Thursday’s release — specifically, results for Virginia, Maryland, and metropolitan D.C., where federal employees comprise a large percentage of the workforce. It may still be too early to see much evidence of a spike in even such granular data, but analysts are watching.

On the productive side of the economy, we’ll get a few more regional Fed manufacturing reports, including Dallas on Monday, Richmond on Tuesday, and Kansas City on Thursday. We’ll also get durable goods orders on Thursday, which serves as a leading indicator for the manufacturing sector in general. Two questions will be on the minds of analysts: One, whether the budding recovery in manufacturing is sustainable, and two, if the recent uptick in activity is related to advance ordering ahead of expected tariff increases (see also Friday’s trade balance data for hints about the potential direction of trade policy).

Under the category of “miscellaneous,” we’ll get a few more opportunities to test the depth of the housing market’s malaise, while two releases that originate from the Windy City might be worth your attention: Monday’s National Activity Index from the Federal Reserve Bank of Chicago is a good way to cross-check the results of last week’s relatively benign Index of Leading Economic Indicators, while Friday’s Business Barometer (more commonly known as the “Chicago PMI”) from the ISM of Chicago will either confirm or deny last week’s Global PMI data showing that manufacturing is on a mild upswing even as services activity dipped back underwater.