The number of consumers with balances on their accounts has increased for a third consecutive quarter in 2022. It reached 20.4 million, just below the peak of 20.9 million in Q1 2020. The article also discusses a number of other issues related to consumer credit growth, including the tight labor market and a rising noninterest income that weighs on bank profitability. The main concerns are highlighted below.
Labor market conditions remain tight
The U.S. consumer credit growth rate is projected to slow considerably in 2022, but it won’t send economists into a frenzy or give the National Retail Federation sleepless nights. The decline in January may simply be a reversal of November’s unusually large increase. But policy makers will be closely monitoring the numbers to determine whether consumers have created a trend toward debt repayment. This may be a sign of an impending economic slowdown.
Leveraged loan default rate could rise by 1.75% by March 2023 from a near-record low of 0.26% in April 2022
As the U.S. economy slows and the Federal Reserve tightens policy, the default rate on leveraged loans may rise. The market’s recent sell-off has increased the percentage of loans trading below 80. This will likely negatively affect issuer credit quality and access to capital. The likelihood of a recession in Europe is increasing, as well.
Core CPI growth accelerates in second quarter of 2022
U.S. consumer credit growth is slowing. But the slowdown will not send economists into a panic or give the National Retail Federation sleepless nights. The drop in January reflects a correction of November’s unusually large increase. Economists and policy makers will watch these numbers to determine if the slowdown is permanent, or if consumers’ attitudes toward debt repayment are changing.
Noninterest income weighs on bank profitability
The decline in revolving credit could mean that consumers have more money to spend, or it could mean that consumers are cutting back on their spending. Personal consumption expenditures, which are tracked by the St. Louis Fed, have been largely on a flat growth curve for several years. And wages have barely kept pace with inflation, and have been increasing only modestly. If you’re unsure of which indicator to look for, read our Q1 2022 Quarterly Credit Industry Insights Report, which provides insights on credit cards, auto loans, mortgages, and personal loans.
Credit card origination volumes set an all-time record in Q4 2021
Despite the fact that consumer credit growth is slowing down, it will not send economists into a frenzy or cause the National Retail Federation to lose sleep over it. The drop in January’s revolving credit figures may be a correction to November’s unusually large increase. Nonetheless, policy makers will be closely monitoring the numbers to see if consumers start a trend toward debt repayment. If that occurs, it may be an early indication of an economic slowdown.
Job openings at a near-record high
The Conference Board’s leading, coincident, and lagging economic indexes signal when the business cycle is about to reach its peaks and troughs. The U.S. Leading Economic Index decreased by 0.8 percent in June 2022 and by 0.6 percent in May, reversing a 3.3 percent increase in the second half of 2021. However, there is Hva er lån med betalingsanmerkning? – Finanza (Guide til lån med betalingsanmerkning) for this slowdown. Rising energy and food prices are likely to further curb the economy.