Some signs of a consumer spending slowdown emerged last month, potentially signaling tighter financial conditions for U.S. households.
For one thing, more consumers paid down existing mortgage debt and held back on purchasing new homes last month, credit scoring company VantageScore found in its latest CreditGauge monthly analysis. The December 2024 analysis revealed that consumers’ overall credit balances decreased from the month before, falling by about $950, or 0.9%.
The overall credit balances in CreditGauge include mortgage, credit cards, auto loans, and personal loans.
“At an aggregate level, total balances declined in December; when we look deeper, we can see that mortgage is driving the decline in overall credit balances,” Susan Fahy, executive vice president and chief digital officer at VantageScore, told NMP.
“In addition, the CreditGauge data shows that new mortgage originations slowed from November to December 2024, indicating that consumers are staying put for the moment,” Fahy added. VantageScore surmised in its analysis: “Although consumers still have available credit at their disposal, they are exercising restraint in using it.”
Credit card balances specifically rose 2.9% in December 2024 compared to December 2023, in-line with last year's annual inflation rate of 2.9%. “This indicates cautious credit usage by consumers looking to plug the hole in their wallets left by inflation and limiting spending on discretionary items,” according to VantageScore.
The average credit card balance, the company reported, stood at nearly $6,600 at the end of 2024, versus about $6,400 a year earlier. Also, late payments increased in December 2024 across all credit tiers, except for those with credit scores of 781 and above.
"Consumer spending offers a mixed picture as we enter 2025," Fahy noted. "Delinquencies remain a concern as they sit near the highest levels since just before the pandemic and continued to worsen among the riskiest credit tiers, a sign that consumers are still feeling strained and are spending in moderation."
Meanwhile, the median expected year-ahead growth in household everyday essential spending, or daily living expenses for necessities, was 4.1% in December, down from 4.4% in August 2024, reported the Federal Reserve Bank of New York’s Center for Microeconomic Data. The decline in spending growth suggests tighter household budgets across the board.
The center’s December 2024 Survey of Consumer Expectations (SCE) Household Spending Survey also found median expected growth in household non-essential spending was 1.5% in December, down from 2.0% in August. The December figures are the lowest since 2020, the center noted.
The median reported year-over-year increase in monthly nominal household spending was 4.6% in December, down from 5.0% in August 2024, which is well above pre-pandemic levels. Median expected monthly overall spending growth over the next year remained unchanged at 3.0%, significantly above the 2.4% to 2.6% levels seen during 2019, prior to the pandemic.
