The Most Important Thing Today (7/26/23)

• A lot has been written about the strength, and potential risks, facing consumer balance sheets, which have enjoyed tailwinds from a tight labor market for the last few years.
• One barometer of that health is the rate of past due credit card balances across the major US issues, and that rate has climbed from recent lows to 1.1% in May, though is still well below both pre-pandemic levels as well as the 10-year average.
  • The chart shows Bloomberg’s monthly compilation of the average 30+ day delinquency rate across American Express, Bank of America, Capital One, Chase, Citibank, and Discover.
• While the overall rate differs slightly from the Federal Reserve’s dataset, which shows a 2.43% delinquency rate as of the first quarter, the more frequently updated dataset from Bloomberg can provide insights into underlying trends facing consumers.
• While the proportion of credit cards that are late has climbed from sub-1% levels last summer, it has remained at about the same levels since February and will be an interesting data set to keep an eye on in combination with the Fed’s policy moves, jobs, and inflation.

Source: Helios Quantitative Research, Bloomberg, Federal Reserve