Consumers are facing ‘widespread’ rise in loan delinquencies

Via Marketwatch

More borrowers are falling behind on car loans, credit cards and other types of consumer debt

Credit-card delinquencies touched the highest level since early 2012, according to Ned Davis Research

Consumers have been facing a “widespread” rise in loan delinquencies since the Federal Reserve began jacking up interest rates last year, according to Ned Davis Research.

Credit-card delinquencies rose 21 basis points to almost 3% in the third quarter of this year, the highest level since the first quarter of 2012 (see chart), when looking at past due debt held by commercial banks.

Late credit-card payments have been a major driver of overall consumer-loan delinquencies, which increased to 2.53% in the third quarter, the highest rate since the first quarter of 2013.

“Clearly, some consumers are struggling to keep up with rising interest rates,” Joseph Kalish, Ned Davis chief global macro strategist, wrote in a Wednesday client note.

Rising delinquencies come as outstanding credit-card debt has reached a record of about $1.2 trillion this year, and the rate of interest being charged also has touched a record of about 23%, according to Deutsche Bank Research.

But on the bright side, Kalish at Ned Davis noted that the consumer-loan delinquency rate still sits below the historical mean of 3.07%, for bank-held debt.

Also, while rising delinquencies may be “a problem on the margin for consumer spending,” he doesn’t think it will be enough to derail the economy.

Higher rates didn’t deter a record 200.4 million shoppers from turning out for the five-day period from Thanksgiving to Cyber Monday, according to a survey from the National Retail Federation released Tuesday.

However, the average amount spent was pegged at $321.41, which was about 1% less than last year, signaling a “sluggish start” to the all-important holiday shopping season, said Ted Rossman, senior industry analyst at Bankrate.

“It’s looking increasingly likely that holiday sales will fall short of the NRF’s 3-4% projected increase over last year,” Rossman wrote Tuesday in emailed commentary. “That figure basically matches the inflation rate, so if you adjust for inflation, recent retail sales figures show a net decline versus last year.”

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