Black Friday, Red Account.
If Santa's broke, what does that mean for the rest of us?
Black Friday, Red Account
As the busiest shopping season approaches and the election concludes, it’s no surprise that economic hardship played a significant role in Trump’s decisive victory. With 60% of Americans living paycheck to paycheck, many are seeking relief from financial strain. This holiday season offers an opportunity to evaluate the state of the average American consumer and its implications for retail sales.
Understanding Consumer Buying Power
To assess consumer spending potential, we must examine access to credit. Currently, U.S. credit card debt has reached a record $1.166 trillion, which translates to $7,236 per person on a per capita basis. However, this figure is misleading. While 82% of American adults hold credit cards, 47% have carried a balance for at least one month this year. This means nearly half of credit card holders are accruing debt, while the other half carry no balance at all, skewing the "per capita" calculation.
In reality, the $7,236 average doesn’t reflect the true financial burden borne by many consumers, especially those living paycheck to paycheck. This highlights the uneven distribution of debt and buying power, further complicating predictions for holiday spending.
Delinquency Rates on the Rise
Debt alone doesn’t paint the full picture. Another critical metric is credit card delinquency rates, representing accounts that are at least 30 days overdue. The current delinquency rate of 3.25% is significantly lower than the 7% peak during the Great Recession of 2009, but it’s steadily climbing. Just two years ago, in Q4 of 2021, the rate was near 1.5%.
This upward trajectory signals increasing financial stress among consumers, which could constrain their ability to participate fully in holiday shopping.
Increased Reliance on “Buy Now, Pay Later”
Another telling indicator is the rise of “Buy Now, Pay Later” (BNPL) programs, which allow consumers to split purchases into installments, often interest-free if payments are made on time. Usage of BNPL programs has grown from 12% in 2022 to 14% in 2023. Alarmingly, 69% of users reported that BNPL was the only way they could afford their purchases.
While these programs provide short-term relief, they also underscore the financial constraints many Americans face, hinting at deeper economic challenges.
Looking Ahead
Numerous other economic markers could help predict holiday retail performance, but the emerging narrative is clear: Americans are increasingly reliant on debt and alternative financing, signaling significant financial strain.
As a former presidential candidate, I campaigned on the belief that the American dream has become unaffordable for most, and that drastic measures are needed to stave off a potential recession. The upcoming holiday sales season will act as a barometer for consumer confidence and the economic health of average Americans. If spending falters, it will be a stark reflection of the financial challenges so many are facing.
The question remains: Will the perception of financial hardship translate into reality this holiday season?