Total consumer credit growth in April paints a misleading picture. It only appeared positive because March was revised down into negative territory, exposing a lot of red in the ledger. The reality is sobering: consumer spending went negative in April after adjusting for inflation, coinciding with a shrinkage in revolving consumer credit, such as credit cards. It seems the consumer has hit the wall, signaling the end of the debt binge.
Caution is warranted. The credit card default rate for small banks has skyrocketed to 7.8%, a level unseen since 1991. This could spell disaster. U.S. household debt has reached an all-time high of $17.7 trillion, up by $190 billion in the first quarter of 2024. As a percentage of GDP, it stands at approximately 77%, lower than the 100% seen in 2009, but still alarming.
The categories of debt are staggering:
- Credit Card Debt: $1.12 trillion
- Auto Loans: $1.62 trillion
- Student Loans: $1.60 trillion
- Mortgages: $12.44 trillion
What happened is a clear indication of consumers reaching their financial limits. The implications are vast. A shrinking revolving credit market and negative consumer spending highlight a fragile economy on the brink of a significant downturn. The unprecedented default rates among small banks suggest a brewing financial crisis.
The impact is profound. As consumer credit dries up, spending will likely contract further, exacerbating economic instability. High household debt levels across multiple categories reflect a population heavily burdened, with little room to maneuver financially. The challenges are immense. Policymakers and financial institutions must navigate this precarious situation with caution. The potential for widespread financial distress looms large, demanding swift and effective action to prevent a full-blown economic crisis.
Sources:
Total consumer credit only grew in Apr b/c Mar was revised down into negative territory; there's a lot of red in the ledger and the bill is coming due… pic.twitter.com/RlFvj9qVNX
— E.J. Antoni, Ph.D. (@RealEJAntoni) June 8, 2024
Woah – here's another big piece of the puzzle: consumer spending went negative in Apr after adjusting for inflation, the same month that revolving consumer credit (things like credit cards) also shrunk; looks like the consumer has really hit the wall and the debt binge is done: pic.twitter.com/9YZFkTaZAM
— E.J. Antoni, Ph.D. (@RealEJAntoni) June 8, 2024
CAUTION: Credit card default rate for small banks have hit 7.8%
A level that has never been seen since 1991
This could get ugly pic.twitter.com/wZaXcN4zxA
— Game of Trades (@GameofTrades_) June 7, 2024
US household debt hit an all-time high of $17.7 trillion, up by $190 billion in Q1 2024.
As a % of GDP it is ~77%, below ~100% in 2009.
Categories:
1) Credit Card Debt: $1.12T
2) Auto Loans: $1.62T
3) Student Loans: $1.60T
4) Mortgages: $12.44T
👇👇t.co/PEYgGeZYZn— Global Markets Investor (@GlobalMktObserv) June 8, 2024