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A growing number of US consumers are feeling the financial strain as they prepare for increased prices resulting from the sweeping import tariffs imposed by the Trump administration. This has raised concerns about a crucial aspect of the US economy.
JPMorgan reported in its first-quarter earnings that the percentage of loans in its credit card division classified as unrecoverable had reached a 13-year high.
Across the industry, the charge-off rate has surpassed pre-pandemic levels, signaling a shift from the exceptional credit card payment performance during the pandemic when government stimulus programs were in effect.
Consumer spending is a cornerstone of the US economy, and with signs of weakening financial stability among Americans after a period of robust growth, there are fears of economic slowdown amid rising prices and interest rates. There is a growing concern that the US economy could potentially enter a recession within the next year.
JPMorgan CEO Jamie Dimon acknowledged the uncertainty in the current environment, with the chances of a recession standing at 50/50 according to the bank’s economists.
There are worries that consumers will face additional pressure from the higher prices resulting from President Trump’s proposed tariffs on imports, including a 10% levy on goods and a 145% tariff on Chinese imports.
JPMorgan CFO Jeremy Barnum noted a potential uptick in spending in April, particularly on items expected to see price increases due to tariffs.
Consumer confidence in the US has been declining since December, with concerns about trade tensions, as indicated by a recent University of Michigan poll. The survey showed a significant number of respondents anticipating higher unemployment in the coming year, reaching levels not seen since 2009.
Analysis of store foot traffic data from Placer.ai suggested that consumers were flocking to discount stores towards the end of March, possibly in anticipation of new tariffs.
While consumer sentiment is weakening, Walmart CFO John David Rainey noted sales volatility but maintained the company’s sales growth outlook.
A recent report from the Philadelphia Fed revealed that the number of US credit card holders making only minimum payments hit a 12-year high by the end of 2024.
The report also highlighted an increase in delinquent credit card accounts, indicating heightened financial strain among consumers.
JPMorgan’s Barnum remains optimistic about consumer credit, noting that lower-income consumers show relative resilience despite weaker cash buffers.
Wells Fargo, another major US bank, reported a decrease in net charge-offs this quarter, suggesting stable customer activity.
Dimon emphasized the importance of monitoring the unemployment rate as a key indicator for future loan losses, given its strong correlation with credit quality.
This article includes contributions from Akila Quinio
sentence: “The cat chased the mouse around the house.”
Rewritten sentence: “Around the house, the mouse was chased by the cat.”