[00:00:00] This is Sales Globe Signals and I'm Mark Danolo.
[00:00:05] A Credit Christmas the Rising Cost of Getting less in Sales Globe Signals we ask two questions.
[00:00:14] What are the market signals and what do they mean for profitable revenue growth?
[00:00:20] What you need to know Nominal holiday spending continues to rise, but real inflation adjusted spending peaked in 2021 and has since flattened or declined.
[00:00:33] Household savings have fallen by roughly $1.6 trillion from their 2021 peak, weakening the consumer's financial buffer.
[00:00:42] Credit card balances have surged to record levels, reaching approximately 1.08 trillion in 2024.
[00:00:50] The spread between credit card APRs and the fed funds rate has widened from about 12.5% to over 16%, making everyday borrowing historically expensive.
[00:01:02] Consumer demand is increasingly financed, not funded, raising payment risk even as headline sales remain resilient and revenue growth supported by high interest credit is less durable and more Fragile. Heading into 2026, what are the market signals?
[00:01:19] Black Friday, Cyber Monday, and holiday spending overall have dominated recent headlines. By most accounts, regardless of consumer sentiment, holiday spending this year continued at a strong pace.
[00:01:31] Now let's dig deeper into some signals that may enlighten your view on commercial revenue growth for your company.
[00:01:38] Signal 1 Holiday spending continued to increase but has actually decreased on an inflation adjusted basis. At first glance, US Holiday retail sales look robust and continue to grow in nominal terms, reaching record levels in recent years.
[00:01:53] However, when adjusted for inflation, retail real holiday spending tells a far more restrained story. 2021 was the real peak in holiday spending, driven by massive government stimulus and record pandemic savings.
[00:02:06] Despite the headlines and increased spending, everything since in inflation adjusted terms has been maintenance, not expansion.
[00:02:15] After peaking around 2021, inflation adjusted holiday sales flattened and then drifted lower even as nominal sales continued to rise.
[00:02:24] The widening gap between nominal and real sales reflects price increases doing more of the work than volume or purchasing power.
[00:02:32] In other words, revenue has been growing faster than unit volume as consumers are spending more dollars but not necessarily buying more.
[00:02:40] Inflation, not volume, explains much of the headline growth as consumers are absorbing higher prices without materially increasing consumption.
[00:02:49] What about 2025?
[00:02:51] Early reads suggest the nominal trend line continues upward, but unless inflation meaningfully cools, the real spending line is unlikely to follow.
[00:02:59] In effect, 2025 risks extending the same pattern we've seen since 2022, which is higher revenue dollars supported by pricing and credit, not by expanding consumer purchasing power.
[00:03:11] What does this mean for profitable revenue growth?
[00:03:14] Nominal revenue growth increasingly overstates the true strength of underlying demand as inflation adjusted holiday spending has flattened since its 2021 peak, much of the apparent growth in top line revenue is being driven by price increases, mix shifts and financing, not by expanded unit volume or customer purchasing power.
[00:03:34] For growth leaders, this creates a risk of false confidence.
[00:03:38] Revenue may appear healthy, but it's becoming more sensitive to price resistance, promotional intensity of which there was less this holiday season, and credit availability.
[00:03:49] Businesses that plan for continued volume expansion based on nominal growth alone risk overinvesting capacity, sales, coverage, or inventory that the market cannot sustainably absorb profitable revenue growth in this environment requires a sharper focus on revenue quality, understanding where growth is price driven versus demand driven, which customers are absorbing higher prices without incremental value and how long that behavior can persist.
[00:04:15] The implication is clear. Growth strategies must assume slower real demand, tighter customer budgets, and greater scrutiny on value delivered per dollar spent. In short pricing can no longer do all the work. Companies that fail to adjust their growth assumptions risk protecting revenue today at the expense of margin retention and long term customer health.
[00:04:37] Signal 2 A reversal of Fortunes from Savings to Credit Household savings surged during the pandemic, peaking in 2021 at approximately $17.6 trillion, creating an unprecedented cash buffer for consumers.
[00:04:53] At the same time, credit card balances fell sharply, bottoming out at around $830 billion in 2020 as stimulus and reduced spending allowed households to pay down revolving debt. That relationship has since reversed.
[00:05:08] The lines crossed directionally in 2019 and 2020 and spending stayed strong even as sentiment weakened and delinquencies began to edge up.
[00:05:18] After a brief pandemic driven pullback, credit card balances have risen to record levels.
[00:05:24] This re leveraging coincides with the drawdown of excess savings and helps explain why consumer spending remains resilient despite weaker sentiment.
[00:05:33] From 2022 to 2024, household savings steadily declined, falling to roughly $16 trillion, while credit card balances climbed to a record $1.08 trillion.
[00:05:45] This continued increase in debt and decrease in savings signals a structural shift.
[00:05:50] Consumer spending is no longer being supported by excess cash but by revolving credit.
[00:05:57] In short, savings acted as the shock absorber first and and now credit is playing that role. But a savings decline weakens resilience, with credit growth increasing fragility and decreasing the risk that consumers can handle from unforeseen events, especially today's interest rates. What does this mean for profitable revenue growth?
[00:06:16] The shift from savings funded to credit funded consumption fundamentally changes the risk profile of revenue growth.
[00:06:23] When spending is supported by excess savings, demand is resilient and forgiving.
[00:06:28] When it's supported by revolving credit, demand becomes fragile, rate sensitive, and interruption prone as household savings have declined and credit card balances reach record levels, consumers are increasingly operating with less financial slack.
[00:06:42] This means revenue growth may persist, but with higher volatility, shorter buying cycles and greater exposure to economic shocks such as job loss, health care expenses or changes in credit availability.
[00:06:55] For businesses. This raises the stakes around customer segmentation and offer design growth that's concentrated in credit dependent segments carries higher risks of payment delinquency, churn delayed purchasing decisions and demand compression when conditions tighten.
[00:07:11] Revenue supported by credit is also more likely to require heavier discounting or extended terms to sustain momentum, placing pressure on margins.
[00:07:19] Profitable growth in this environment requires leaders to distinguish between demand that's durable and demand that's being temporarily bridged by consumer credit. Companies that recognize this shift early can adjust pricing, sales incentives and portfolio emphasis toward customers and use cases with stronger balance sheets and longer term value.
[00:07:38] While credit can sustain demand, it weakens its foundation. The winners will be those who adapt before that weakness shows up in their revenue results.
[00:07:48] Signal 3 the spread between short term and long term borrowers is big and and increasing as we saw in our sales globe signals issue on interest rates 30 year mortgage rates have stabilized or softened modestly and have continued to decline over the long run. But shifting to near term consumer credit, the cost of short term consumption is punitive.
[00:08:11] This of course favors the savers and borrowers using secured lines of credits like home equity lines which carry interest rates over 15% less than credit cards.
[00:08:22] Over the past decade, average credit card APRs have climbed steadily, reaching new highs as the Federal Reserve raised rates. While the fed funds rate rose sharply beginning in 2022. Credit card APRs have increased in parallel but show little relief during prior easing cycles. This dynamic has materially raised the cost of consumer spending, increasing the risk profile of credit supported demand even as headline sales remain resilient.
[00:08:49] To exacerbate the situation, the spread between short term and long term borrowing has continued to increase over the past decade. The spread between average credit card APRs and the fed funds rate has widened from roughly 12.5% to more than 16%, reflecting a structurally higher cost of revolving consumer credit compared to secured lines of credit.
[00:09:10] Consumers are financing their holidays at rates higher than their homes.
[00:09:15] What does this mean for profitable revenue growth? The widening spread between short term and long term borrowing costs fundamentally changes the quality of consumer demand.
[00:09:24] While long term secured borrowers benefit from relatively stable mortgage and home equity rates, consumers relying on revolving credit face historically punitive costs to fund everyday consumption. This creates a two tier consumer economy, one segment that can borrow cheaply and plan long term and another that's financing its short term needs at rates exceeding 20%.
[00:09:47] For businesses that serve these segments, this means revenue growth increasingly depends on customers with shrinking financial flexibility.
[00:09:55] Credit supported spending may persist in the near term, but it's far more sensitive to income disruption, employment changes and unexpected expenses as borrowing costs remain elevated. Even if policy rates begin to ease, the payment risk rises, demand becomes more elastic and customer decision cycles shorten.
[00:10:15] 10 questions about your customer strategy for a high consumer credit market as consumer demand becomes increasingly credit funded to pressure test your customer Strategy, here are 10 questions you may ask your organization.
[00:10:28] 1. Where does our current revenue depend on customers financing purchases with revolving or short term credit rather than cash or savings?
[00:10:37] 2.
[00:10:38] Which customer segments are most exposed to rising credit aprs and how concentrated is our growth in those segments?
[00:10:45] 3.
[00:10:47] How would our demand conversion rates or average order sizes change if customers face tighter credit limits or higher minimum payments?
[00:10:56] 4. What assumptions about normal consumer affordability are embedded in our pricing, packaging and promotional strategies?
[00:11:04] 5. How sensitive is our sales motion to monthly payment size versus total purchase price and do we fully understand the trade off?
[00:11:12] For more on this, see Sales Globe signals a 50 year mortgage is the next generation going to live life as a service?
[00:11:20] 6.
[00:11:21] Where are customers stretching financially to buy from us today and how sustainable is that behavior over the next 12 to 24 months?
[00:11:29] 7.
[00:11:30] How well do our sales teams recognize early signs of credit stress in customer conversations, objections and buying delays?
[00:11:39] 8.
[00:11:40] If consumer credit conditions worsen, which parts of our portfolio are most at risk and which are more resilient?
[00:11:47] 9. How might we redesign offers, terms or value propositions to reduce customer reliance and high interest revolving credit?
[00:11:56] And 10. If credit supported consumption becomes structurally riskier, what changes should we make now to protect our revenue quality, not just revenue volume?
[00:12:05] Your call to action each of these questions that apply to your organization should prompt valuable conversation and ideas around your business and your customer strategy for a higher consumer credit market.
[00:12:16] Look at each of the signals we discussed, then consider their impact from two perspectives. How will they affect your customers and their ability to grow? How will they affect your business?
[00:12:27] Get beyond current state and ask their team where they see the signals projecting ahead and what this means for your organization's profitable growth.
[00:12:34] Consider each of the questions I've asked, add your own, create a plan and get into action questions for us. Email us at infoalesglobe.com or contact
[email protected].
