Tuesday, January 9, 2007

Late Credit Card Payments Increase

From the Houston Chronicle:

Late payments on credit card bills climbed in the summer to their highest point in a year, suggesting that some consumers are feeling financially squeezed.

The American Bankers Association, in its quarterly survey of consumer loans, reported today that the percentage of credit card payments 30 or more days past due increased to 4.57 percent in the July-to-September quarter of last year.

That was up from 4.41 percent in the second quarter and was the highest since the third quarter of 2005, when the delinquency rate stood at 4.74 percent.

Household debt is a huge issue, especially in this recovery. Here is a chart from the St. Louis Fed of total household debt outstanding. Notice how the curve's steepness has increased during this expansion:

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Also note that the household financial obligation ratio is now at record levels:

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As Tula notes below, wages for this expansion have been stagnant for this expansion. The Big Picture noted that health cost increases are still eating a huge amount of pay raises in the form of higher deductibles and premiums. That leads to the question of, "where is the money for this expansion coming from?" Savings were already at low levels before this expansion began, consumer spending has increased for the duration of this expansion, yet wages for most people are still stagnant.

The answer is debt. Calculated Risk has this chart of GDP growth with and without Mortgage Equity Extraction:

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That's a big difference.

As the bill continues to come due, expect this trend to continue.

Many thanks to the wonderful person who sent me the Houston Chronicle article.