Many economists have been surprised by the strength of the U.S. economy in the past few years, strength that has been driven largely by strong consumer spending. While the overall economy remains generally healthy, there are some signs of strain among consumers that should be monitored closely. A good deal of the surge in consumer spending was funded by revolving debt which has risen more than 50% since mid-2021. According to Lending Tree, the average credit card balance is now $7,236 although a survey by NerdWallet suggests an average household balance of $10,500. The flashing yellow light comes from the Philadelphia FED which just reported that the percentage of consumers making only the minimum required payment on their cards reached a 12-year high of 10.75% in the third quarter of 2024. With an average interest rate of 21.4%, outstanding credit card balances compound quickly for those making only the minimum payment-some borrowers will be hard-pressed to ever dig out of the hole. While considerably below the 6.8% peak during the Great Financial Crisis, the share of card holders with balances more than 30 days past due rose to 3.52%, a 10% increase from the previous level of 3.21%.
There is no reason to become overly concerned just yet, but these statistics suggest that we should be quite vigilant given that the consumer represents about 70% of the overall economy.