Important Takeaways:
- One month ago, when multiple discount retailers were lamenting the sudden collapse in US consumer purchasing power, we observed the reason this unexpected hit to US consumption: as the US personal savings rate had collapsed, the growth in consumer credit was slowing, and in July, credit card debt growth posted its first decline since the covid crash, just in time for another month of record high credit card rates.
- But fast forwarding just one month later, when in a stunning reversal, July consumer credit growth unexpectedly reversed the dramatic June slowdown, and soared more than $25 billion, to a new record high of $5.093 trillion.
- Sure enough, the sudden surge in credit card debt was a big surprise because according to the Fed, the average rate on interest-bearing credit card accounts just hit a new record high of 22.76%, which is a vivid reminder that while banks are happy to hike credit card rates, they rarely if ever cut them.
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