The American Consumer Is Piss Broke

Submitted by QTR's Fringe Finance

Yesterday, as part of laying out the two paths I can see the economy taking, I wrote that beneath the surface, the American consumer is tapped out.

This morning, I noticed two reports that came out yesterday that add even more evidence to that conclusion.

Yesterday The Wall Street Journal highlighted how rising prices and the highest interest rates in decades have pushed even relatively high-income households into financial distress. One example was a hospital operations director earning nearly $200,000 annually who accumulated $15,000 in credit card debt at a 26% interest rate. Despite making the minimum payments, the balance barely moved.

And the broader data confirms this isn’t an isolated story.

As I’ve noted, the percentage of credit card balances that are 90+ days delinquent climbed to 13.1% in the first quarter, the highest level in 15 years and the worst reading since the aftermath of the 2008 financial crisis. Total credit card balances reached a record $1.25 trillion for a first quarter, while average credit card interest rates have surged from 14.6% in early 2022 to roughly 21% today.

Delinquency rates have risen across low-, middle-, and high-income households alike. In other words, this is no longer just a lower-income problem. The financial strain is moving up the income ladder, which fits perfectly with what I’ve been writing about for months.

Student loan delinquencies have also exploded higher as repayment obligations returned. Credit card delinquencies have surged to post-financial-crisis highs.

Auto loan defaults, particularly among subprime borrowers, are sitting near multi-decade extremes. New data from Experian shows that nearly 19% of new vehicle loans now carry monthly payments of at least $1,000, up from 17.4% a year ago and more than triple the 5.4% level seen just five years ago. Contrary to popular belief, these...(READ THIS FULL COLUMN HERE).