Executive Summary
According to the New York Fed’s Quarterly Report on Household Debt and Credit for the first quarter 2025 (released May 2025), total consumer debt has reached $18.2 trillion. Consumers are strapped as higher interest rates on growing debt balances are eating up a larger portion of their income. The personal savings rate has dropped to 4.5%, as consumers do not have funds leftover to save. Real personal consumption fell in May by 0.3%, the most this year. High debt balances have pulled future consumption forward, and now combined with higher interest rates, consumers are struggling to pay down their balances. The graphs in The Details below provide a good illustration of the consumer debt picture.
For further analysis, continue to read The Details below for more information.
“This would be a much better world if more married couples were as deeply in love as they are in debt.”
–Earl Wilson
The Details
According to the New York Fed’s Quarterly Report on Household Debt and Credit for the first quarter 2025 (released May 2025), total consumer debt has reached $18.2 trillion. The debt is broken down by type in the chart below, obtained from this report.
The graph below illustrates the portion of the total debt which is 90+ days delinquent, by loan type. Notice how student loan delinquencies shot straight up as the Department of Education resumed collections. It is also important to note that serious delinquencies on credit cards and auto loans are approaching levels witnessed after the Great Recession and Financial Crisis.
Although serious delinquencies are the highest for younger ages, the graph below shows a rapid surge in 90+ day delinquencies for all ages.
Consumers are strapped as higher interest rates on growing debt balances are eating up a larger portion of their income. The personal savings rate has dropped to 4.5%, as consumers do not have funds leftover to save. Real personal consumption fell in May by 0.3%, the most this year. The year-over-year rate of growth in nominal personal consumption has fallen drastically after the Covid stimulus induced spending, as shown in the graph below from Economist Liz Ann Sonders.
In an economy driven by personal consumption, the falling consumption rates and rising debt delinquencies portend weakening growth. High debt balances have pulled future consumption forward, and now combined with higher interest rates, consumers are struggling to pay down their balances.
The consumer debt problem, just like the government debt problem, continues to worsen.
The S&P 500 Index closed at 6,173, up 3.4% for the week. The yield on the 10-year Treasury Note fell to 4.28%. Oil prices decreased to $66 per barrel, and the national average price of gasoline according to AAA fell to $3.19 per gallon.
© 2024. This material was prepared by Bob Cremerius, CPA/PFS, of Prudent Financial, and does not necessarily represent the views of other presenting parties, nor their affiliates. This information should not be construed as investment, tax or legal advice. Past performance is not indicative of future performance. An index is unmanaged and one cannot invest directly in an index. Actual results, performance or achievements may differ materially from those expressed or implied. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy.
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