CNN printed an article at present, entitled “What’s really happening in America’s economy”. Most factors are standard, however one graph was attention-grabbing – bank card debt:
Supply: CNN.
In addition to the standard complaints that this quantity was not normalized by disposable private earnings, or GDP, this struck me as a humorous indicator to glom onto. Right here’s normalized bank card debt together with delinquency charge.
Determine 1: Bank card debt (n.s.a.) to disposable private earnings, % (blue, left scale), and bank card delinquency charge for all business banks, % (tan, proper scale). NBER outlined peak-to-trough recession dates shaded grey. Supply: NY Fed; Federal Reserve Board and BEA by way of FRED, NBER, and writer’s calculations.
So bank card debt normalized goes down in Q2, however delinquencies are rising. This implies that one thing is occurring, for some segments of the inhabitants, even whereas family debt-to-GDP and family debt service to disposable earnings ratios are falling.
Determine 2: Family debt to GDP, % (blue, left scale), and debt service to disposable earnings charge, % (tan, proper scale). NBER outlined peak-to-trough recession dates shaded grey. Supply: IMF by way of FRED, Federal Reserve Board by way of FRED, NBER.
Debt service is perhaps fixed at the same time as rates of interest rise because of the pervasiveness of fastened charge mortgages. So, credit score woes are seemingly extra urgent for some earnings segments than others.
