Consumer spending remains strong as a mountain of credit card debt continues to pile up, with Americans increasingly turning to plastic to fund their ...
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| | Top News  Getty Images Consumer spending remains strong as a mountain of credit card debt continues to pile up, with Americans increasingly turning to plastic to fund their purchases. According to the Federal Reserve Bank of New York, credit card debt reached $1.14T in Q2, up 5.8% from a year earlier, or about $6,500 per person. While the steadily rising figure took a break during the pandemic years, it has soared since 2022 as many consumers swipe away to counter their dwindling purchasing power.
Driving the spike: While inflation growth has come down from record highs, price tags on nearly every item are still elevated compared to where they were several years ago. That has made portions of the population reliant on credit cards to finance purchases of everyday goods and services, increasing non-discretionary balances and making it more challenging to pay down debt. A resumption of student loan repayments has also contributed to the increase, especially for millennials and Gen Z, while others may be having a harder time paring back their lifestyles despite the price pressures.
Interest rates haven't made the issue any better, with the average annual percentage rate now over 20%, making it a really costly debt for consumers. It's also higher than any point since the Fed started tracking card APRs in 1994, contributing to the overall U.S. household debt that topped $17.8T in Q2. Meanwhile, credit card delinquency rates are on the rise, with 9.1% of credit card balances transitioning into delinquency as of June, up from 8.5% the previous quarter.
What's next? While markets grew fearful after the latest employment figures on Friday, a recession has not appeared yet, in part due to strong consumer spending. Swiping plastic could keep up if the Fed starts cutting rates, starting with an easing cycle that's likely to begin at the next FOMC meeting in September. The Biden administration is also trying to help out the sector by capping credit card late fees, but a recent stay on the CFPB ruling could mean a win for Bread Financial (BFH), Synchrony Financial (SYF) and Capital One (COF). Also check out the latest SA analysis on other credit card giants. | | Featured  Want to get more from investing efforts? Take our world-class Premium service for a test drive. Sign up now, and you can try all of Premium's powerful tools and resources: - Our proprietary Quant ratings, plus ratings from Wall St. and analysts on Seeking Alpha
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Past performance is no guarantee of future results. Any content and tools on the platform are offered for information purposes only. Seeking Alpha does not take account of your objectives or financial situation and does not offer any personalized investment advice. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. | | Global Stock markets around the world are in rebound mode again on Wednesday. Japanese equities led the way after the Bank of Japan's deputy governor assured investors by saying there would be no interest rate hikes when markets are unstable. "BOJ needs to maintain monetary easing with the current policy rate for the time being, with developments in markets at home and abroad being extremely volatile," Shinichi Uchida declared. The fresh statements contrast with hawkish comments from BOJ Governor Kazuo Ueda last week that led to a widespread unwinding of yen carry trades. ( 2 comments) | | Cannabis Cannabis stocks are on watch after Vice President Kamala Harris selected Minnesota Gov. Tim Walz, a noted marijuana reform supporter, as her running mate for the Democratic presidential ticket. In May 2023, Walz signed into law an adult-use marijuana bill that also expunged non-violent cannabis convictions. Harris has supported the Biden administration's efforts on cannabis legalization on the federal level and moving marijuana to a Schedule III substance from Schedule I. That's a change from her days as San Francisco District Attorney. ( 51 comments) | | Media Looking for streaming profitability, Disney ( DIS) is raising prices for Disney+, Hulu and ESPN+ ad-supported and ad-free plans in the U.S., starting Oct. 17. The company will also introduce "continuous playlists" in early September, which will show a steady stream of curated content on Disney+. The new feature is aimed at boosting user engagement and will help viewers who struggle with choosing a show or movie to watch. DIS shares closed up 2.5% yesterday on the news, while the media giant is scheduled to report quarterly results before the bell today, with investors closely watching its ongoing turnaround. ( 24 comments) | | Today's Markets In Asia, Japan +1.2%. Hong Kong +1.4%. China +0.1%. India +1.1%.
In Europe, at midday, London +1%. Paris +1.6%. Frankfurt +1.5%.
Futures at 7:00, Dow +0.9%. S&P +1.2%. Nasdaq +1.3%. Crude +1.4% to $74.25. Gold +0.3% to $2,437.70. Bitcoin +4% to $57,316.
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