Consumer debt on the rise

Today, investors and economists will be paying close attention to the Federal Reserve’s latest consumer credit report for April.

Economists predict the report will show total consumer debt rose by $35 billion to a record $4.57 trillion. In the first quarter, consumer credit grew at a seasonally adjusted annual rate of 9.7%.

Revolving credit, which is mostly credit card debt, accounts for almost a quarter of all consumer debt. It jumped 21.4% in the first three months of the year. The data suggests that as inflation soared, consumers kept retail spending high by borrowing more.

Early last month, the New York Federal Reserve announced that household debt climbed to $15.8 trillion in the first quarter of 2022. This represents an increase of $266 billion or 1.7% from the previous quarter, and $1.7 trillion more than at the end of 2019 before the start of the COVID-19 pandemic.

Mortgage and auto loan balances drove the increase, the Fed said, climbing $250 billion for mortgages and $11 billion for auto loans.

“Rising consumer debt levels as the economy slows and interest rates rise could lead to a sharp decline in consumer spending. Given that consumer spending accounts for 70% of US GDP, any setback could tip the economy into a recession,” Caleb Silver said. , editor of Investopedia.

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