Consumer stress is on the rise

By the numbers: Two new reports out this past week show some cracks in the consumer's finances.

• The number of credit card holders making only minimum payments on their bills has jumped to a 12-year high, a study by the Philadelphia Federal Reserve found.
• The level of cardholders only making minimum payments rose to 10.75% in the third quarter of 2024, the study found, continuing an upward trend from 2021.
• The number of 30+ day delinquencies also rose during this period, up to 3.52%. That's double the delinquency rate of 1.57% from the pandemic low in the second quarter of 2021.

The number of car repossession assignments also suggests that people are experiencing more difficulty paying their regular bills.

• The rate of vehicle repossession assignments at the end of 2022 surpassed pre-pandemic levels, according to a Consumer Financial Protection Bureau report released Thursday.
• In the month of December 2022, 0.75% of all outstanding vehicle loans were assigned to repossession – a 22.5% increase from December 2019.
• "Supply chain shocks and higher interest rates drove up costs to purchase and finance a car," said CFPB Director Rohit Chopra in the report, suggesting cars are becoming harder to afford for more people.
• The researchers tracked repossession assignments rather than delinquencies, with the assignments occurring "when lenders indicate to a repossession agent or a repossession forwarder ... that a vehicle is eligible to be repossessed."
• The data doesn't capture the total number of delinquencies, which is likely larger; or the number of carried-out repossessions, which is likely smaller.

The big picture: Consumers kept the U.S. economy chugging along in 2024, but they're clearly also feeling strain.

• Retail sales increased by 0.4% in December, slowing from the 0.8% jump in November. For the year retail sales rose 4%, down from 5% the year prior.
• The health of the U.S. economy is largely dependent on consumers, who account for about two-thirds of all economic activity.

Reality check: It's not all bad news.

• The percentage of credit card card holders paying their credit card balances in full is still well above pre-pandemic levels (34.29% in the third quarter of 2024), suggesting a shrinking middle ground for consumers.
• New car prices have actually been coming down in real terms, though one reason that Americans are paying more for new cars is that they're increasingly opting for larger vehicles.

The bottom line: Consumer spending data and confidence surveys aren't telling the whole story, especially as soaring food and energy prices continue to hurt wallets.