Economic uncertainty + high interest rates continue to persist, US consumer credit growth slows down
The growth rate of consumer credit in the United States has slowed down, with total consumer credit increasing by $18.1 billion in January, down from $37.1 billion in December of last year. High inflation and borrowing costs are affecting household finances, while rising unemployment is softening the labor market. Federal Reserve Chairman Jerome Powell stated that despite the uncertainties facing the economy, the current situation remains good, and interest rates will remain stable. The ratio of minimum credit card payments has reached a record high, and the delinquency rate on auto loans has hit its highest level in 30 years
According to the Zhitong Finance APP, after approaching record growth a month ago, the borrowing pace of American consumers has slowed down. Data released by the Federal Reserve on Friday showed that total U.S. consumer credit increased by $18.1 billion in January, exceeding economists' average forecast of $14.9 billion, while the revised total credit for December last year increased by $37.1 billion.
Meanwhile, the total outstanding credit card and other revolving debt rose by $9 billion; non-revolving credit, such as auto loans and tuition loans, also saw a similar amount of growth. Both figures have decreased compared to the previous month.
Stubborn inflation, high borrowing costs, and reduced savings during the pandemic continue to impact American household finances. Earlier data on Friday indicated that as unemployment rises, the U.S. labor market softened in February. Prior to this, policies from President Trump and a series of weak economic data had raised concerns about the broader economy.
Nevertheless, Federal Reserve policymakers have stated that they will keep interest rates stable until more progress is made in curbing inflation. On Friday, Federal Reserve Chairman Jerome Powell indicated in a speech that despite facing uncertainty, the current economic situation in the U.S. remains good, with a robust and balanced job market. The Federal Reserve should remain cautious and does not need to rush to adjust policy rates at this stage; it can afford to wait patiently for the situation to become clearer, and the cost of maintaining caution is very, very low.
Keeping interest rates stable for a longer period is another disadvantage for Americans holding higher credit card and other loan balances. Data shows that the proportion of consumers who are only paying the minimum on their credit cards has reached a record level, while the proportion of auto owners who are delinquent on their loans has reached the highest level in over 30 years. Additionally, according to data from the New York Federal Reserve, the proportion of American consumers in debt has risen to the highest level in nearly five years by the end of 2024