Economic activity increased modestly across the United States since early July, while several Federal Reserve districts reported rising consumer loan delinquencies and greater household reliance on credit to cover everyday expenses, according to the Federal Reserve’s Beige Book released earlier this week.
Ten of the 12 districts reported growth in the slight to moderate range, and two reported no change. Consumer spending grew slightly on balance, with contacts describing heightened price sensitivity alongside solid high-end purchases. Auto sales were mostly subdued amid downbeat consumer confidence, high fuel prices and rising financing costs. Employment rose very slightly, wage growth was modest to moderate in most districts, and prices increased moderately in eight districts.
Reports on consumer credit quality varied by region. In the New York district, delinquency rates crept up for most loan types, and a senior loan officer said the increasingly poor credit quality of consumer borrowers weighed on loan growth. Auto lenders there voiced growing concern about delinquencies and defaults. Bankers in the St. Louis district observed rising delinquencies and slow payments among households and small businesses, though overall delinquency levels remained low. Some San Francisco district contacts reported increases in delinquencies, declines in consumer bank account balances and higher credit card debt. Chicago district lenders noted an uptick in consumers making only the minimum payment on their credit cards.
Not every district reported deterioration. Richmond district respondents said loan delinquencies were stabilizing, and Dallas district bankers reported that overall loan performance improved for the first time since 2022.
Atlanta district community contacts said individuals and families increasingly relied on credit cards, payday loans and buy now, pay later services to cover basic expenses. Kansas City district contacts said consumers were relying more on credit cards to manage nondiscretionary spending between paychecks, and that some households redirected funds from rent, utilities and food while taking on additional debt as gasoline prices rose. A large retailer in the Minneapolis district reported more purchases shifting from cash and debit to credit, and a wealth manager there said spending among some lower-income individuals was being sustained by borrowing, including 401(k) loans.
Minneapolis district bankers expected consumer loan quality to deteriorate because of recent weakness in auto lending. Atlanta district banks reported much tighter underwriting standards.
