Economic Insights – Q1 2025

Resilience Meets Risk: Structural Headwinds for the U.S. Economy

The U.S. economy continues to show strength in productivity and wage growth, but mounting structural challenges, rising public debt, inflationary trade dynamics, and growing consumer financial stress signal turbulence ahead. Hive Research examines these developments with a focus on underserved borrowers and the evolving credit landscape.

KEY POINTS

Economic Strength with Rising Debt Concerns

While real GDP dipped slightly in Q1, underlying productivity remains strong. Wage growth has continued across most income segments. However, the U.S. debt-to-GDP ratio is reaching unsustainable levels, with expanding fiscal deficits threatening long-term economic stability.

Tariffs and Inflationary Pressures

With U.S. tariffs now at century-high levels particularly targeting Chinese imports, inflation risks are mounting. This dynamic mirrors aspects of the 1970s stagflation era. Rent prices have risen faster than wages in several markets, adding further pressure to core inflation.

Interest Rate and Credit Market Trends 

Despite stable income levels, consumer loan demand is weakening. Credit card delinquencies are rising sharply, and more borrowers are making only minimum payments, an indicator of deepening financial strain. The Fed has paused rate cuts in response to mixed signals from inflation and labor markets.

Shifting Consumer Behavior

Spending patterns remain focused on essential emergency needs, auto repairs, and groceries top the list. Yet checking account balances are declining, and reliance on credit is increasing. These trends highlight financial vulnerability, particularly among non-prime consumers.

Investor and Global Market Imbalances

The U.S. has drawn more than $25 trillion in inward investment, but outbound investment remains sluggish. This imbalance could challenge the sustainability of current economic strength, especially as global capital flows shift amid trade and geopolitical uncertainty.

Technology-Driven Resilience

AI-enhanced analytics and behavioral scoring tools. Proprietary models now support over 90% of borrower communications, enabling precision in underwriting and payment timing. As macro volatility rises, data infrastructure remains key to agility and impact.