Consumer borrowing stalls as delinquency rates surge, signaling worsening financial distress ahead.

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The recent data on U.S. consumer borrowing paints a concerning picture of financial stability. Delinquency rates, which Austan Goolsbee of the Chicago Federal Reserve Bank highlighted as a critical indicator, have indeed surged in early 2024. This uptick suggests heightened financial stress among American households, with approximately 3.2% of outstanding debt now in some stage of delinquency as of March.

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Of particular concern are the sharp increases in transition rates into delinquency across various debt categories. Credit card delinquencies have risen to 8.9%, while auto loans follow closely at 7.9% annually. These figures underscore a widespread trend of worsening financial conditions, with more borrowers struggling to meet their financial obligations.

Joelle Scally from the New York Fed’s Household and Public Policy Research Division noted that the increase in missed credit card payments is indicative of deepening financial distress among households across different age groups. This trend is alarming as it reflects broader economic challenges, potentially signaling tougher times ahead for consumer spending and economic stability.

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FED Warns Against Rising Delinquency Rates, Calls It A “Leading Indicator That Things Are About To Get Worse”

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