The Fed's preferred inflation gauge ran 4.1% year-over-year in May, the hottest reading since April 2023 and the fourth straight month of acceleration. Core PCE held at 3.4%. The income line looked healthy (up 0.7% on the month), but the bulk of the gain wasn't broad-based raises; it was a one-time slug of federal disaster payments to farmers. For households struggling with an auto loan payment or a card balance, paychecks barely moved: real disposable income rose just 0.3% on the month, and the saving rate is a thin 3.0%. Against that, the Warsh Fed's hawkish turn has markets eyeing a September hike, not a cut.

CCM read: Two pressure points for the ABS ecosystem. First, higher-for-longer repricing lifts funding costs across the capital stack and squeezes excess spread, most acutely in subprime auto and private-label cards. Second, the composition of the income gain matters for debt-service capacity: one-off transfers don't refinance a car note or cure a delinquency the way payroll does. With inflation still above 4% and the Fed leaning hawkish, a 3.0% saving rate leaves households little cushion, even as cheaper gas starts to offer some relief at the pump. 

Final June consumer sentiment came in at 49.5, up roughly 10% from May's all-time low of 44.8. Cheaper gas drove the bounce, but the mood is still grim: even with the rebound, this is the second-lowest reading in the survey's history going back to the 1970s, and it sits nearly 20% below a year ago. Inflation expectations cooled but stayed elevated, with the year-ahead read easing to 4.6% from 4.8%, still well north of February's pre-war 3.4%.

For a third straight month, more than half of respondents spontaneously volunteered that high prices are eroding their finances. And the improvement in mood wasn't evenly shared: it came mostly from wealthier, stock-owning households, while lower-income ones, the most exposed to gas and grocery prices, saw little relief.

CCM read: For ABS, don't trade off the headline gloom alone. Consumer sentiment has decoupled from actual outlays, and what rebound there is skews prime, leaving subprime collateral the real soft spot.