A Look At The Latest Consumer Debt Numbers and a Data Point That May Explain Why U.S. Consumer Spending Remains Elevated
We’re in strange economic times. Some economic indicators are showing the U.S. economy is improving, while others tell a different story.
The reasoning is likely the result of an artificially manipulated economy for the past fourteen years or so and major, global economic shocks thanks to governments’ actions to address the pandemic the previous three years.
And, of course, we can’t ignore the war overseas.
Combine those factors and economies around the world are having a hard time finding their footing…either up or down.
I saw this article last week and found it interesting…thought I’d post its link for you to check out.
Titled, “Consumer Debt Soars By $394BN, Most in 20 Years, To Record $16.9 Trillion as Young Borrowers Struggle to Repay,” it addresses the U.S. consumer and how they’re handling our current economic situation…primarily as it relates to high inflation.
Taking on more debt, of course, especially for those in the 30 – 49 age bracket, is the primary way Americans are coping. And, while you might think it’s piling on credit card debt, that’s not completely it. You have to keep in mind, interest rates are at levels not seen in years, resulting in the price of car loans, mortgages and personal loans (including credit cards) to cost more each and every month. So, while credit cards are a contributor, there are other factors at play when discussing higher debt levels.
So, if U.S. households are taking on more debt as a result of the current economic climate, shouldn’t that bite into the economic numbers, especially as it pertains to spending?
That’s not what economic indicators are showing in any meaningful way…at least yet. And there are a number of reasons why that may be the case.
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One, however, stood out, and it’s something many of us who don’t currently have student debt likely don’t consider.
Approximately 43 million Americans have some amount of student debt. Many of those millions fall into the prime spending years, demographically. Student loan payments were a burden to their monthly budgets – until March 13, 2020, when the federal government paused student loan payments to ease the financial burden caused by the pandemic. And that forbearance has continued up to this date, with the latest projected end to payment forgiveness being June 30, 2023.
That’s a lot of time for those with student loans to go without having to make monthly payments. And that extra monthly cash has likely aided the consumer spending numbers as many other economic indicators slow.
The article addresses this point at its end with, “And here is why the US consumer is “so strong” – when you don’t have to worry about repaying your student debt, well… you spend that money on other useless stuff.”
What do you think? Is the economy getting better, or just beginning a downward slide? And what explains the divergence of economic indicators? Thanks if you have any thoughts to provide.
