The Tire Store Indicator
When customers visit a tire store, they typically intend to replace all four tires. However, shifting purchasing habits in 2024 suggest growing financial strain. At the start of the year, most customers followed through with full replacements. But by midyear, many opted for just two or three tires. By January 2025, a significant portion purchased only one—replacing the most worn-out tire while delaying the rest due to higher prices and tighter household budgets.
This slight but telling shift signals broader economic pressures, reflecting a slowdown that is now appearing across multiple sectors and could have lasting impacts.
Economic Warning Signs
The slowing number of tires sold per customer is another sign that the U.S. economy may be rapidly heading in the wrong direction.
Additional evidence of economic strain is mounting:
Household Debt at Record Highs
The Federal Reserve Bank of New York’s Q4 2024 Household Debt and Credit Report showed household debt hit a record $18.04 trillion, up $93 billion (0.5%). Payment delinquencies rose to 3.6%, with credit card debt at $1.21 trillion and auto loan debt at $1.66 trillion. Without significant income growth, consumer spending will remain constrained.GDP Contraction Ahead
The Atlanta Federal Reserve’s GDPNow forecasting model currently projects a -2.4% GDP contraction for Q1 2025, a steep drop from its 3.9% growth estimate in early February. This signals a sharp and unexpected economic slowdown rather than positive growth for Q1.Consumer Confidence Plunges
The University of Michigan’s Consumer Sentiment Index fell to 64.7 in February 2025, down from 71.7 in January and 76.9 in February 2024. This decline reflects growing anxiety about inflation, personal finances, and the broader economy.
The Index has averaged 84.6 every month since its inception in 1978.
Rising Inflation Pressures
Inflation has climbed steadily for five months, with the Consumer Price Index (CPI) rising from 2.4% in September 2024 to 3% in January 2025.
Meanwhile, the Producer Price Index (PPI) suggests continued price hikes as producers seek to pass rising costs onto consumers.
Manufacturing Remains a Concern
The U.S. manufacturing sector grew slightly in February, the manufacturing PMI® registered 50.3% after 26 months of contraction, according to a March 3, 2025 report by the American Bankers Association. Many remain concerned about further growth in U.S. manufacturing in 2025 due to potential tariff constraints, especially in the automobile, building and energy sectors.Housing Market Slump
U.S. housing starts fell 9.8% in January 2025 to 1.366 million, due to high mortgage rates, rising construction costs, and adverse winter weather. We believe a rebound is unlikely in the short term, especially considering that 47.3% ($11.59 billion) of the total value of lumber and wood product imports into the United States came from Canada in 2024. This is exacerbated by President Trump’s threat to resume tariffs on Canadian products in April.Weak Job Growth
The ADP National Employment Report for February 2025 released on March 6th, showed disappointing job gains—just 77,000 new private-sector jobs, well below the forecasted 140,000. The disappointing news continued on March 7th when the broader U.S. Bureau of Labor Statistics monthly unemployment rate was released with additional bad news. Overall jobs created in February was 151,000, short of the expected level of 160,000. The U.S. unemployment rate ticked up to 4.1% from an expected 4%, while monthly earnings grew on an annualized basis at 4%, rather than the 4.2% predicted by the economists surveyed.Auto Industry at Risk
President Trump has delayed tariffs on foreign auto imports from Canada and Mexico until April, but potential levies could raise SUV prices by $9,000, pickup trucks by $8,000, and electric vehicles by over $12,000, according to The Wall Street Journal. With $136 billion in annual U.S.-Mexico auto trade—and another $50.4 billion between the U.S. and Canada, the $186.4 billion worth of motor vehicles and parts between the three countries was larger than the GDP of Slovakia or Kuwait and slightly smaller than the GDP of Nigeria in 2024.
Michigan ($53.8B with Mexico and $22.1B with Canada) is the largest American automotive trading partner for both countries. Increasing tariffs could have significant economic repercussions for the Great Lakes state and the U.S. automobile industry.
Stocks in Correction Territory
As of March 7, the S&P 500 (-3.78%), DJIA (-1.58%), and the NASDAQ (-7.31%) are all in correction territory since President Trump took office in 2025. If returns on 401k’s, college funds and vacation funds continue to decline, we fear faith in the President’s overall plan could begin to erode with his most loyal supporters.
The Path Forward
These indicators paint a challenging picture for the U.S. economy. Growth is stalling, inflation remains persistent, and consumer spending is under pressure. The path ahead must focus on two critical areas for the government: increasing revenue while controlling costs.
We believe President Trump’s efforts to make his first-term tax cuts permanent, reduce regulations—particularly in the energy sector—and streamline government spending are essential to economic recovery and growth. They must be his significant priorities in the first half of 2025. Achieving a balanced budget within two years would put the U.S. on firm footing, allowing for the national debt reduction beginning in fiscal 2028 while fostering economic expansion. Without intervention, the U.S. national debt could surpass $54 trillion by 2034, according to Statista and the Congressional Budget Office. However, if economic growth is achieved and spending is restrained, our national debt-to-GDP ratio could improve significantly. It could fall below 80% instead of its current 123% or reach 60% as early as 2035.
The warning signs are clear. Policymakers and business leaders must decisively restore confidence and economic stability before the slowdown deepens.
Dr. Timothy G. Nash is director of the McNair Center at Northwood University. Mr. Bob Thomas is COO of the Michigan Chamber of Commerce. Mr. Thomas Rastin is a retired business executive from Ohio.