The US economy is an intricate, delicate system that overwhelmingly relies on the spending by American consumers. In fact, in 2013, retail sales made up 35% of the US GDP that year and while it is not a majority of GDP, it still represents a significant chunk of the overall economy. Being that retail sales are such a key part of the US economy, it certainly is ideal to check in on the health of the consumer and determine an outlook. Specifically, we will be taking a look at credit card debt held by Americans for clues as to how the consumer is positioning themselves right now and what that could mean moving forward.
Americans back at 2012 levels with credit card debt after reaching $55 Billion mark at end of 2014
According to the 2015 CardHub Credit Card Debt Study, American consumers paid down 7% of their debt compared to the first quarter 2014. Total credit card debt still outstanding totals to $831.2 billion, compared to $872.2 billion at the end of 2014. Additionally, credit card defaults reached its lowest levels since 1995. At first glance, American credit card debt data looks promising. Credit card debt default is at a 20 year low, Americans are near pre-recession debt levels, and to businesses are still continuing to hire at a fast pace. This is to be expected after Americans added $57.4 billion in credit card debt for 2014.
This Tiger Cub Giant Is Betting On Banks And Tech Stocks In The Recovery
The first two months of the third quarter were the best months for D1 Capital Partners' public portfolio since inception, that's according to a copy of the firm's August update, which ValueWalk has been able to review. Q2 2020 hedge fund letters, conferences and more According to the update, D1's public portfolio returned 20.1% gross Read More
CardHub forecasts second half debt build up in credit card debt back to 2014 levels
At the moment, American consumers are still paying off the massive amounts of credit that was used particularly during the Q4 2014. As I mentioned prior, American consumers ended 2014 with over $57 billion in fresh credit debt and effectively rose the average household credit card balance to a 6 year high of $7,177. The point here is that Americans are paying off debt, but only because they added so much at the end of 2014 and CardHub forecasts Americans adding about $55.8 billion in new credit debt in 2015.
Overall, consumers are paying off debt right now, which means the economy is certainly going to be a little more sluggish than it will be later in the year. The pay-down period is not bullish for the economy, but CardHub’s forecast of another massive credit card debt increase by the end of the year suggests that the economy could see a boost from retail sales moving forward