📉 Economic anxiety is now showing up in consumer behavior, not just sentiment, according to the Consumer Bankers Association’s Q1 2025 Chart Book.
Data released last week by the Consumer Bankers Association shows a rare alignment between how consumers report feeling about the economy and their actual financial decisions; they are spending less, borrowing less, and both consumers and small businesses are taking increasingly cautious steps when it comes to their financial situations.
By the numbers:
🔻 Sentiment is down: The University of Michigan’s Index of Consumer Sentiment fell for the fifth straight month, down nearly 30% since January. Declines were consistent across all income tiers, driven largely by inflation, trade uncertainty, and income instability.
💳 Credit card balances dropped 2.4% in Q1, due in part to seasonal paydowns. Delinquencies also continued to ease, as consumers made higher full balance payments and benefited from slower balance growth.
🚗 Auto loan balances also fell by $13 billion, just the second time that’s happened since 2011. New auto originations slowed across all credit tiers except the highest-scored consumers.
🎓 Student loan delinquencies surged from 0.7% to more than 8% following the resumption of federal reporting, leading to sharp credit score drops for all borrowers, including those with good and great credit scores.
🏡 Homeowners are tapping equity: As pandemic-era savings deplete, more consumers are drawing on home equity for liquidity. Bookings of home equity loans are up nearly 20% year-over-year.
📉 Loan demand is falling: Below-prime consumer credit applications dropped by 12 points between June 2024 and February 2025. Bank data confirms demand is especially down for credit cards, SBA loans, and business credit lines.
📊 Small businesses are holding back: New term loans, lines of credit, and SBA 7(a) loans all declined significantly. Bank surveys show a sharp downturn in small business credit demand, particularly among firms reacting to trade policy uncertainty.
The bottom line: After months of pessimism, consumers and businesses are taking tangible steps to limit their financial exposure. While overall consumer debt is still growing, the behavior behind it suggests caution, especially as student loan obligations return and credit conditions tighten
