MacroResearchBoard

U.S. Consumer Credit Delinquencies: Not Yet A Red Flag – May 28, 2024

A just published report updated our investment outlook, which hinges in the near run on a continuation of a calm bond market. The global economic backdrop is both improving and broadening, at a time when there is little DM economic slack. This combination warns that another upleg in DM bond yields is inevitable. However, in the interim, the risk-on phase is likely to persist.

Clients have recently queried us about the rising trend in U.S. consumer credit delinquency rates. Our research highlighted that they are rising from extreme pandemic-era lows, and do not (yet) herald trouble for aggregate consumption. The level of household debt to household income is relatively low, as is the level of outstanding revolving consumer credit to personal spending. Thus, consumption is less dependent on borrowing than in the past.

Net: U.S. consumer delinquency rates are still historically low, and consumption is less exposed to the consequences of deteriorating credit than in the past. Above-trend growth will persist for the foreseeable future.