The Zhitong Finance App notes that Chicago Federal Reserve Chairman Goulsby emphasized that consumer arrears are currently one of the most worrying economic indicators. His concerns now seem prescient, as new data shows that the delinquency rate will rise sharply in the first quarter of 2024.

Goulsby said, “If the consumer loan delinquency rate starts to rise, this is usually a leading indicator that the situation will get worse.”

The latest data released by the Federal Reserve last week confirmed these concerns. The data showed that the overall delinquency rate had increased. “By the end of March, 3.2% of outstanding debt was in some kind of arrears.”

This marks a significant rise in consumers' financial woes. The data showed a sharp rise in delinquency rates across all debt categories.

Approximately 8.9% of credit card balances and 7.9% of car loan arrears each year. Despite a 0.3 percent increase in the transition rate on mortgages, this rate is still very low by historical standards.

“In the first quarter of 2024, the rate of credit card and car loans transitioning to severe delinquency continues to rise in the first quarter of 2024,” said Joelle Scally, head of regional economics at the Federal Reserve Bank of New York's Department of Family and Public Policy Research. “More and more borrowers are delinquent on credit card payments, which indicates that some families' financial woes are worsening.”

Despite these worrying trends, the Federal Reserve has yet to determine a single reason for the rise in the delinquency rate. Instead, it suggests that several factors may be at play.

During the pandemic, Americans increased their savings and spending, and without significant savings as a buffer, they are likely to continue to maintain high consumption rates, making them more dependent on debt.

Furthermore, in recent years, there has been an increase in loans to borrowers with lower credit scores, which may also lead to an increase in delinquency rates.

As the situation evolves, policymakers and financial institutions must closely monitor these indicators to address potential economic impacts. Rising delinquency rates may indicate more significant economic problems, and prudent and proactive measures are needed to prevent further deterioration.