The article highlights a significant decline in consumer debt growth in December 2023, following a year of substantial credit expansion. Although the total increase in credit throughout 2023 was 8.4%, the credit growth slowed down to 0.4% in that month. In the fourth quarter of 2023, credit card debt increased by $212 billion to $1.13 trillion, contributing to a total household debt of $17.5 trillion in the same quarter. Delinquency rates for credit card and auto loans also grew, especially among younger and lower-income households.
The decline in consumer debt growth at the end of 2023 may indicate cautious consumer spending that would potentially affect overall economic activity and GDP. Furthermore, debt-to-ratio falls under the general criteria for most borrowers; that is, household income growth equates and/or outpaces household debt growth, maintaining relatively healthy borrowers' ability to pay. Ultimately, the reverse in consumer spending habits would potentially provoke the Federal Reserve to cut interest rates promptly.
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