Prolonged Inflation, Labor Strikes, and Natural Disasters: What Recent Events Could Mean For the U.S. Market
RECENT POLITICAL, ECONOMIC AND WEATHER EVENTS COULD POTENTIALLY AFFECT THE U.S. MARKET FOR BOTH LENDERS AND CONSUMERS. In a recent Equifax Market Pulse webinar, experts discussed the potential impacts of recent national and global happenings. Equifax Risk Advisor Dave Sojka and President and Founder of Keybridge, Dr. Robert Wescott, answered these audience-submitted questions on what changes the market could see as a result.
Q: Have you noticed a change in debt loads to consumers due to a prolonged inflationary environment? And if so, what are those impacts?
Dave Sojka: I think we've all been impacted by higher prices at the grocery store, at the auto dealership, or in the housing market, and these are the major factors at play. And so what does this translate to? Overall consumer debt hit $17.5 trillion, 2.7% increase over July of 2023. But if we look at that year-over-year, it's just under 3% for all of 2024. But if we compare that to previous years, the full year-over-year change was averaging about 5.6% in 2023, and in 2022, that increase was 8%. So while the number is high, the rate of growth has normalized over the last 8 months. In regards to bank card debt, which is at a trillion, that rate of increase year-over-year is about 9.5%. But if we benchmark that against previous years, it's a lot better than the 16% it was in 2023, and the 15% it was in 2022.
Q: Where are consumer credit card delinquency and loss rates headed?
Dave: Credit card delinquencies ebb and flow on a yearly basis. They tend to rise from June or July until February of the following year, and then decrease once tax return season begins. Starting in about February, we had rates at low levels, less than 2% coming out of the pandemic, and since then, rates have been at or around 3%. So while delinquencies will continue to rise throughout the rest of the year, that's expected. But we have seen the year-over-year rate of growth actually improve in 2024. That rate has been at or below 25% growth this year. August was at 14%. And if we look back in time, that range was between 35% and 55% year-over-year growth in 2022 and 2023 respectively.
Q: What are the impacts of the recent strikes, Middle East turmoil and global economic slowdowns on the U.S. economy? And, how does this impact the Fed's rate cut plans for this year and into next year?
Robert Wescott: First of all, with natural disasters like the recent hurricanes, those types of events do lead to job losses and the Fed measures jobs monthly during the week that includes the 12th of the month. So if people are unable to get to work that week or if Boeing workers are on strike, then they are a negative for the monthly jobs numbers. I think that we're going to get data in early November for the month of October and you are likely going to see a pretty good downward shift because of the recent strikes and weather events. But, I don't think the Fed takes that into account hardly at all. They understand these are temporary effects, and they are likely to bounce back a month or two later. So I don't think it's going to be a big change there.
The Middle East is a bigger issue. With the situations happening in the region, we could see a jump in oil prices. And the one thing we know from the history of the last 50 years is that if there's a big spike in oil prices, you can put the global economy into recession fairly quickly. So even within two or three months, you could put the world economy into recession if oil prices went to, say, $125 or $140 a barrel. I'm not saying that they're going to do that, but you have a lot of people shooting missiles and other weapons in the Middle East, and there is a risk there for the global economy.