Consumer credit card delinquency rates continue to increase.

With earnings season well under way, we have been focused on consumer-oriented financial institutions to provide insight into the consumer setup. The read-through on currently available data suggests consumers’ inability to pay down card balances has increased which could lead to a slowdown in consumer spending.

The table below highlights the sequential increases in credit card delinquency rates from a few of the more well-known names in the category we are focused on. These metrics have been increasing at a pace last seen leading up to the Global Financial Crisis. However, the unemployment rate was weakening at that time, moving to 5% by the end of 2007. Today, the unemployment rate has been below 4% for two years. This likely means that these are mostly employed people that are losing their ability to pay off credit card debt. The direction of delinquency rates from here could impact lenders’ ability and willingness to extend credit and/or lead to an increase in the cost of credit from levels already at all-time highs. Ultimately, lack of available credit or increased costs of credit could negatively impact consumer spending and broader economic activity moving forward.

Source: Company Filings.

We will continue to monitor the consumer debt setup and provide an update from the February 6^th release of the Federal Reserve Bank of New York 4Q23 Household Debt & Credit Report next week.

The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance.  The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.