U.S. HOUSEHOLDS SHOW SIGNS OF STRESS AS NEW DELINQUENCIES RISE

U.S. households showed signs of increasing financial stress in the first quarter, with credit card balances not declining in the way they typically do at the start of the year and delinquencies rising for most types of consumer loans.

Households added $148 billion in overall debt, bringing the total to $17.05 trillion, according to a report released by the Federal Reserve Bank of New York on Monday.

Balances are now $2.9 trillion higher than just before the pandemic.

Consumers typically build up more credit card debt at the end of the year, during the holiday season, and then reduce those balances at the start of the following year, sometimes with the help of tax refunds.

But for the first time in 20 years, that wasn’t the case this year, suggesting some households are under strain from higher prices and may be relying on credit cards to maintain their spending.

“Credit card balances were flat in the first quarter, at $986 billion, bucking the typical trend of balance declines in first quarters,” researchers wrote in the report.

The overall delinquency rate remained low by historical levels, at 2.6 percent. But the share of debt that became delinquent — meaning it was at least 30 days late — is rising for most loan types, including credit cards and auto debt.

Many households took advantage of federal stimulus payments and forbearance programs for student loans and other debt to build up savings and pay down credit card debt and other loans during the pandemic.

Some of that was reversed as consumers resumed more normal spending patterns, including traveling and going out to restaurants.

Student loan delinquencies, however, have remained flat, with the federal forbearance on payments and interest still in place. Younger borrowers, who have been struggling more to keep up with debt payments, could face even more pressure after student loan payments are resumed, New York Fed researchers said.