Société Générale Warns of US Economy Vulnerability to Debt

Société Générale issued a warning that the US economy has become increasingly vulnerable due to a surge in household debt paired with a decline in personal savings. Total US household liabilities reached a record 19.9 trillion dollars at the end of the first quarter, while the personal savings rate dropped to 2.6 percent in April.

Albert Edwards, a strategist at Société Générale, attributes this trend to the wealth effect, where consumers increase spending as stock and real estate prices rise. This spending is largely driven by enthusiasm for artificial intelligence. Because consumer spending accounts for approximately 70 percent of US GDP, Edwards argues the economy is highly exposed to potential market corrections in the AI sector.

Data from Bespoke Investment further indicates that the credit intensity of GDP reached a 70-year high of 3.73 last year. This suggest that higher levels of debt are now required to fuel economic growth as personal incomes begin to contract.