Caught in the "debt rollover" dilemma! Unpaid debt of American consumers unexpectedly surged in December last year

According to the Zhitong Finance APP, U.S. consumer debt unexpectedly surged in December last year, marking the largest recorded increase, primarily driven by a significant rise in credit card balances and non-revolving credit (such as auto loans and tuition loans).

According to data released by the Federal Reserve on Friday, total U.S. credit soared by $40.8 billion in December, while the previous month was revised to a decrease of $5.4 billion. This unadjusted figure far exceeded Bloomberg's survey expectations of economists.

Specifically, credit card and other revolving credit increased by $22.9 billion in December, far surpassing the decline in the previous month. Meanwhile, non-revolving credit (such as auto loans and tuition loans) rose by $18 billion, marking the highest increase in two years. According to Ward’s Automotive Group, U.S. auto sales at the end of last year grew to the fastest level since May 2021.

For the entire year of 2024, the total amount of unpaid consumer credit in the U.S. is expected to grow by 2.4%, consistent with the growth rate of the previous year. However, despite a robust job market continuing to drive consumer spending growth, high price levels and borrowing costs are increasing the financial burden on households. As of November last year, the average interest rate on credit card accounts reached 22.8%, close to the highest level since the Federal Reserve began tracking in 1995.

Federal Reserve officials expect a more moderate pace of interest rate cuts this year, with an overall rate reduction of one percentage point likely in 2024. However, high borrowing costs have pushed more American consumers into a "debt rollover" predicament. According to data released by the Philadelphia Fed last month, in the third quarter of last year, an increasing number of Americans were only making the minimum payments on their credit cards, reaching a historic high.

At the same time, the credit card delinquency rate is also rising. Data shows that about 3.5% of credit card balances were overdue by more than 30 days, and 1.8% of accounts were severely overdue. Both figures are more than double the lowest levels seen after the pandemic in 2021, indicating that the risk of consumer debt in the U.S. is on the rise.

Under the dual pressures of high inflation and high interest rates, the debt burden on American consumers continues to grow, which may further impact consumer spending and overall economic growth. In the future, adjustments to the Federal Reserve's monetary policy and changes in the job market will be key factors influencing consumer debt levels