ARLINGTON, Va.–One of the strongest indicators of pent-up consumer demand following the coronavirus-related lockdowns of 2020 can be seen in the surging credit card balances of many Americans. But one CU economist said he does not believe consumer card spending has hit a point where there is any reason to worry.
As CUToday.info reported here, more than half of Americans (62%) say their credit card debt has increased since the beginning of the pandemic, with 52% saying they’ve increased their credit limits to support their growing spending habits, according to a new survey by Business.org.
But those kinds of numbers require some perspective, said NAFCU’s chief economist, Curt Long.
“Even in spite of the big gains seen in last few months, we’re still not where we were pre-COVID when it comes to revolving debt balances,” said Long. “What we’re seeing now reflects gains in labor market. Lenders are coming back to normalizing their standards. They are more willing to make loans than they were previously.”
Filling a Void
While the balances are smaller, credit card loans are expected to help fill some of the void created by the slowdown in auto lending that is being driven by the overall decrease in auto sales. That slower pace of auto sales largely reflects production issues facing most manufacturers, due in large part to an ongoing shortage of computer chips.
In addition, noted Long, a resurging COVID-19 has been especially evident in Asia, which is also affecting production.
“It’s not going to be resolved in the near future,” said Long. “Credit unions can expect ongoing moderate at best growth in auto loan balances.”
As for how the resurgence of the coronavirus, particularly the Delta variant, has changed his own forecasts, Long said the affect hasn’t been as strong as it was early in the pandemic, when many economists were sent back to the drawing board.
Hard to Predict, But…
“I think the economy is going to weather this surge better than previous ones,” Long said. “I think it’s really hard to predict what the Delta variant will do. In Europe, once things turned for the better they started getting better in a hurry. That’s the hope, that things will improve here in the near future. Vaccination rates are starting to improve and that’s a good sign.”