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Anxiety over the cost of living & the direction of the economy could prove costly to Pres Biden & fellow Dems in today's election. Recent surveys show consumer sentiment has risen only modestly & remains well below where it was a year ago, when inflation worries first began to grip policymakers, shoppers & business execs. A report outlined the problem for the current ruling party. The University of Michigan, which releases a closely-watched sentiment survey each month, asked respondents who they trusted more when it came to the economy & which would better for personal finances. The result: overwhelmingly Reps. The survey of 1201 respondents saw Reps with a 37%-21% edge on the question of which party is better for the economy. While that left a wide swath — 37% — of consumers who don't think it makes a difference, the disparity of those with a preference is huge. (The survey did not distinguish whether respondents were likely voters.). On overall sentiment, the Michigan survey saw a reading of 59.9 for Oct, 2.2% better than Sep but 16.5% below the same period a year ago. The reading is just off its all-time low in Jun 2022 & is running close to its lowest level in more than 11 years, according to data that goes back to 1978.
Consumer confidence is near its lowest in a decade, and that could be a problem for Biden
According to TransUnion's Quarterly Credit Industry Insights Report (CIIR), bankcard balances rose 19% during Q3 from a year ago, reaching a record $866B. This was driven heavily by a growth in Gen Z & Millennial borrowers whose balances increased 72% & 32%, respectively, according to the report. At the same time, private label total & average credit lines have reached record highs as well as the average number of accounts per consumer. Overall, number of credit cards issued in Q3 rose to 511M, up from 474M during the same period a year ago. Meanwhile, the average credit card debt per borrower rose from $4857 to $5474. The number of consumers that have access to a personal loan also rose from 19.2M to 22M. The average personal loan debt per borrower is just over $10,700. This time a year ago the average personal loan debt per borrower was $9387. Delinquencies – meaning late monthly payments – have also been rising over the past year and already passed pre-pandemic levels. "Unsecured personal loans have seen record growth in originations and balances in recent quarters. This growth has been fueled, in part, by significant increases in lending to below prime risk tiers," the report said. "This increase, combined with a general deterioration in the financial health of subprime consumers as a result of elevated inflation, has led to an increase in delinquencies, which have now surpassed pre-pandemic levels."
Credit card balances reach new record as consumers battle economic headwinds
A US recession is “quite likely” next year as persistent inflationary pressures force the Federal Reserve to shift interest rates higher than expected, former Boston Federal Reserve Pres Eric Rosengren said. Rosengren said that the central bank now looked likely to increase its terminal policy rate — the level at which it will stop raising interest rates — to more than the 5% forecast by investors, pushing the economy into a mild downturn in 2023. “I think it’s quite likely the U.S. has a mild recession next year,” he said. When asked to put a figure on the possible terminal rate, Rosengren said: “More than 5.5% would be my expectation.” The Fed, at its latest policy meeting last week, raised interest rates by 75 basis points to a target rate of 3.75%-4%, & hinted that rate rises could go further than previously outlined, albeit at a slower pace. Following the announcement, traders bet the terminal rate would reach 5.09% by May from just over 5% before the meeting. However, Rosengren, who retired from his post last year, said his elevated rate prediction — based on both Fed forecasts & his own calculations — was contingent on a weakening of the US labor market & a slowdown in nominal wage growth. For interest rates to peak at 5.5% next year, Rosenberg said the unemployment rate would likely need to hit 5%-5.5%, up from 3.7% today & above the Fed's 4.4% forecast.
U.S. likely headed for mild recession in 2023, former Boston Fed president says
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