Bros before Macros

[Timmy Picklez]

Snippet on Consumer Debt

https://www.morningbrew.com/daily/issues/big-dreams

If you’ve been dropping plastic a lot and hoping it’ll take care of itself later, join the club. Yesterday, the New York Fed released its Q1 report on household debt: Findings include a record-high debt level of $17 trillion, persistent credit card debt, and rising delinquency rates.

A typical first quarter sees credit card balances decline as people pay off what they spent over the holidays while trying to out-gift their in-laws. But, for the first time since the New York Fed started tracking this 20 years ago, that isn’t the case, according to Bankrate’s senior industry analyst Ted Rossman. Instead, balances remained flat over Q1, suggesting that people aren’t cutting back and are probably using credit cards to finance daily spending due to the rising cost of…pretty much everything.

It’s not just that credit card balances are flat. Delinquency is rising, as is its intimidating older brother, serious delinquency, which is when a debt is 90+ days past due. The Fed’s report showed that 4.57% of credit card debt transitioned to serious delinquency last quarter, up from 3.04% in Q1 of 2022. And for credit card holders aged 18–29, 8.3% of balances were in serious delinquency.

Plastic isn’t the only thing to blame
In addition to causing lots of folks to check their credit card balance real quick, the report had a few key takeaways:

Auto loan delinquencies are higher than they were before the pandemic for those under 40. The average monthly car payment has jumped to $729.
Mortgage debt increased by $121 billion in the first quarter, reaching a $12.04 trillion balance even though mortgage originations were way down, likely due to the Fed’s rate increase extravaganza.
Student debt saw a slight decrease in the rate of serious delinquency, which went down to less than 1%—but that’s probably because repayment is paused for now.
Zoom out: Debt balances are almost $3 trillion higher than pre-pandemic, but Fed analysts see one bright spot: Many households are still more financially stable than they were before, thanks to the mortgage refi boom of 2020–2021 when rates were at their lowest.—CC