US Consumer Economy Analysis: Contrarian View on Retail Weakness Amid Expansion Signals

The February 11, 2026 Seeking Alpha article presents a contrarian perspective on recent U.S. economic data, arguing that headline weakness in December retail sales may be obscuring a more resilient underlying consumer economy [1]. The author’s central thesis rests on Personal Consumption Expenditures (PCE) data, which remains robust at 2.5% year-over-year real growth, suggesting genuine consumer spending strength despite concerning retail figures [1]. This perspective challenges the narrative that the U.S. economy is contracting or approaching a significant slowdown.

The Treasury Borrowing Advisory Committee provides additional context, reporting that if December growth maintained the average pace observed during Q4’s first two months, real PCE may have risen approximately 3.2% at an annual rate in Q4 2025 [5]. This figure significantly exceeds the year-over-year baseline cited in the Seeking Alpha analysis, potentially indicating stronger-than-expected consumer momentum.

December 2025 retail sales presented a disappointing picture, registering essentially flat growth despite expectations for continued expansion [2][3]. The “control group” measure—stripping out volatile categories such as gasoline and automobiles—declined 0.1%, falling short of the 0.4% economist forecast [2]. Year-over-year retail sales remained at 3.3%, indicating that while monthly momentum stalled, the annual growth trajectory remained intact [3]. The flat December performance is particularly notable given the holiday shopping season’s importance to retail earnings and consumer sentiment.

The weakness in retail sales data appears partially attributable to seasonal factors and delayed holiday shopping behavior. However, the divergence between retail sales figures and broader PCE measures raises important questions about which metric better captures the true state of consumer spending. PCE encompasses a broader range of services consumption beyond retail goods, potentially providing a more comprehensive view of household expenditure patterns.

Consumer credit performance reveals mounting stress that complicates the bullish economic expansion thesis [4][6]. Bloomberg data indicates that credit card loans delinquent by 90 days or more have reached 12.7%—the highest level in almost a decade [6]. Overall delinquency rates stand at 4.8%, while student loan serious delinquencies have reached 9.6% [4]. Particularly concerning is the record-high 16.2% transition rate into serious delinquency for student loans during Q4 [4].

TransUnion forecasts credit card delinquency rates will remain “virtually flat” with only a one basis point increase expected [4], suggesting the current elevated levels may represent a plateau rather than continued deterioration. However, the concentration of stress among lower-income and younger demographics raises questions about potential spillover effects to broader consumer spending patterns. The interplay between high-frequency spending data (retail sales) and lagging credit indicators (delinquencies) creates interpretive challenges for assessing the consumer economy’s trajectory.

Current market data reveals notable sector rotation that partially validates but also complicates the Seeking Alpha thesis [0]. The Russell 2000 small-cap index has gained 0.70% while the NASDAQ has declined 2.50% over the past month [0]. This IWM > QQQ pattern aligns with historical precedents where small-cap outperformance has preceded economic expansion periods [1]. The S&P 500 remains essentially flat at -0.40%, while the Dow Jones Industrial Average demonstrates resilience with a 2.01% gain [0].

Sector performance reveals more nuanced dynamics [0]. Basic Materials (+1.21%) and Communication Services (+0.81%) lead market performance, while Consumer Defensive (-2.05%) and Consumer Cyclical (+0.74%) sectors show mixed results [0]. The underperformance in Consumer Defensive—a traditionally defensive sector that typically attracts flight capital during economic uncertainty—suggests market participants are actively reassessing consumer spending durability. The relative weakness in Consumer Cyclical despite the overall market’s mixed performance may reflect concerns about discretionary spending sustainability.

The Seeking Alpha article emphasizes small-cap stock outperformance as a historically significant signal supporting the expansion thesis [1]. Russell 2000’s relative strength against technology-heavy indices like the NASDAQ aligns with patterns observed during previous economic expansion periods when smaller, domestically-focused companies benefited from resilient domestic consumption. This sector rotation pattern warrants continued monitoring as a potential leading indicator of economic trajectory.

The apparent divergence between weak retail sales figures and robust PCE data highlights an important statistical nuance in measuring consumer spending [1][2]. PCE includes services consumption—healthcare, housing, transportation services, and other expenditures—that may be growing even as goods purchases stagnate. This methodological distinction suggests that headline retail sales figures may understate true consumer spending strength, particularly as the U.S. economy continues its structural shift toward services consumption.

The data reveals that consumer credit stress remains concentrated in specific demographic segments [4][6]. While aggregate headline figures are concerning, the distribution of delinquency increases matters significantly for macroeconomic assessment. If stress remains contained among lower-income households and younger borrowers— demographics with historically higher baseline delinquency rates—the systemic implications may be more limited than aggregate figures suggest. However, any broadening of delinquency trends to middle-income or older demographics would represent a more significant economic risk signal.

The underperformance in Consumer Defensive sector (-2.05%) despite the Seeking Alpha article’s bullish thesis represents a notable market signal [0]. Consumer Defensive stocks typically perform well during periods of economic uncertainty as investors seek companies with stable earnings regardless of economic conditions. The sector’s weakness may indicate that market participants are less convinced of consumer resilience than the article suggests, warranting careful attention to whether this sector rotation proves transient or sustained.

: The 12.7% 90-plus-day delinquency rate represents the highest level in nearly a decade [6]. While TransUnion expects only minimal further increases, any acceleration would compound consumer spending concerns and potentially trigger broader economic headwinds.

: The record-high 16.2% transition rate into serious delinquency for student loans [4] suggests structural stress that could affect broader credit markets and consumer confidence. The concentration of student loan stress among younger borrowers may constrain household formation and durable goods purchasing going forward.

: The combined underperformance in Consumer Defensive (-2.05%) and modest gains in Consumer Cyclical (+0.74%) [0] signals market concern about spending durability. Sustained weakness in consumer-facing sectors would contradict the expansion thesis and potentially trigger broader market recalibration.

: December’s flat retail sales [2][3] could represent either a temporary pause or the beginning of a more sustained spending slowdown. The upcoming January retail sales data will be critical in distinguishing between these scenarios.

: Continued Russell 2000 outperformance relative to large-cap indices could present opportunities in domestically-focused small and mid-cap companies positioned to benefit from domestic economic activity.

: Given the PCE strength relative to retail goods data, companies in services sectors may offer more direct exposure to resilient consumer spending than retail-focused businesses.

: Basic Materials sector strength (+1.21%) [0] suggests some market participants are betting on continued domestic economic activity, potentially creating opportunities in industrials and materials companies with domestic revenue exposure.

: Real PCE growth of 2.5% year-over-year [1], with Treasury Advisory Committee estimates suggesting Q4 annualized growth of approximately 3.2% [5], indicates underlying consumer spending strength. December retail sales at flat growth with 3.3% year-over-year [3] provides a more mixed picture.

: Credit card 90-plus-day delinquencies at 12.7% [6], overall delinquencies at 4.8% [4], and student loan serious delinquencies at 9.6% with a record 16.2% transition rate [4] reveal mounting credit stress concentrated in specific demographics.

: Russell 2000 (+0.70%) outperforming NASDAQ (-2.50%) [0] aligns with historical patterns preceding economic expansion. Consumer Defensive sector weakness (-2.05%) [0] suggests market participants are actively reassessing consumer spending durability.

: Key upcoming indicators include January retail sales data, the PCE inflation report (the Federal Reserve’s preferred inflation gauge), and continued labor market monitoring—all of which will provide additional context for assessing the consumer economy’s trajectory.