Consumer Debt is Growing Rapidly

Assessing the post-pandemic acceleration

Consumers like to spend. When they spend more than they can afford, they take on debt. This can’t last forever - debt eventually comes due.

It’s worrying then that the amount of debt consumers are taking on is growing at an accelerating pace:

Since the economy is 70% consumption, any downturn in consumer spending will be a big hit to economic activity. Right now, consumer spending is being propped up by increasing amounts of debt.

That isn’t necessarily a bad thing if consumers can service that debt and grow it at a reasonable pace relative to income and assets. But asset prices are down and income becomes more uncertain if we start to see layoffs.

It’s not something to panic over yet. But, it’s important to watch. Growing debt creates a less resilient consumer and, therefore, a less resilient economy.

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