Consumer credit card spending has been steadily increasing in 2019. It’s predicted that this pattern will continue and that balance will continue to rise, leading to concerns earlier in the year that many consumers will struggle to make full payments on their credit cards and loans.
Now, figures released by S&P Dow Jones and Experian show that the number of credit defaults rose again last month, following increases in the previous two months. The index also shows that mortgages and car loans were causing the most problems for consumers.
However, even though the overall default rate for mortgages and car loans went up, it was only a slight increase. For mortgages the rate was 0.73% and for car loans it was 1.05%. Plus, on credit cards, the rate of defaults actually fell by 3.32%.
But, it was noted that, even though the default rates went down, this doesn’t mean debt is decreasing. In fact, consumer debt has increased this year with consumers now owing a total of $1 trillion on credit cards and $38.2 billion being collected in the first 3 months of the year.
There were also some differences in default rates by location. For example, in September, three of the five major MSAs (Metropolitan Statistical Areas) had increases in default rates – Chicago had the biggest increase at 1.19%, followed by New York and Miami.
Although business leaders have recently expressed concerns about the slowing economy in the US, economists say that these figures are reassuring and show that the financial health of consumers is remaining stable and that they are continuing to pay their debts.
However, the economists add that consumer confidence is a key factor in predicting economic downturns and there could be a 25% chance the economy falls into recession next month – these are the highest odds since April. The reports do note, though, that there was no indication that consumers are under any strain, saying “the consumer is doing fine.”