US Consumer Debt
US consumers may be carrying more weight than we realize.
America's credit card balances recently hit a record $1.25 trillion, up from $1.18 trillion in the same quarter last year. That's the highest level since the NY Fed began measuring in 1999.
At the same time, the average credit card interest rates have risen from ~14.5% in 2022 to ~21% today. Credit card delinquencies are now at their highest level in over a decade - and the trend is visible across low, middle, and high-income households alike.
And it's not just credit cards - student loans delinquencies have surged following the resumption of repayments. Auto loan delinquencies are at their highest levels since the aftermath of the Global Financial Crisis. Mortgage delinquencies remain relatively low but they have been quietly creeping up since 2022.
Individually, none of these figures scream recession but collectively they do raise an important question - how long can consumer spending continue to grow if more income is being diverted to servicing debt? The same question could be asked of the US government, but that's a conversation for a another day.
Consumer spending matters because it accounts for roughly 70% of US GDP. If consumers start spending less, the effects eventually flow through to commodity markets.
Less consumer spending can mean:
Fewer cars sold (steel, aluminum, copper, and pgms)
Fewer homes built (lumber, copper, steel)
Lower demand for appliances and electronics (copper, aluminium, rare earths)
Reduced freight volumes (diesel, fuel oil)
Commodity traders spend a lot of time analysing mine supply, smelter output, inventory levels and geopolitics, but sometimes the simpler questions are buried: can the end consumer still afford to buy the finished product?
Eventually every commodity needs a willing consumer to open their wallet, we can't simply rely on AI, infrastructure spending, and tech companies to drive growth.
