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Market Update

The U.S. economy is starting to falter, and consumers may be poised to hasten the slowdown

June 3, 2024
  • amol dhargalkar headshot


    Amol Dhargalkar

    Managing Partner, Chairman
    Global Head of Corporates

    Kennett Square, PA


This past week, the first quarter annualized U.S. GDP decreased from 1.60% to 1.25%. Notably, without consumers, GDP would have been negative. The below graphic shows the breakout of contributors to GDP over the last year. Consumption represented 1.34%, which was more than the overall economic gain of 1.25%.

Source: Bureau of Economic Analysis

The strong dollar contributed to the large decline in net exports of goods and services, but the GDP update broadly shows that the economy is much weaker compared to a few quarters ago. A consumer slowdown, already evident in The Federal Reserve Bank of New York’s Household Debt and Credit Report released last week, could accelerate this trend.

The report revealed that total household debt hit an all-time high of $17.69 trillion, rising by $184 billion just last quarter. Overall, delinquency increased to 1.80% of all borrowers, still well below the pre-pandemic level of 3.20%. However, a deeper look into the composition of the delinquency reveals a more concerning trend. Generally speaking, consumers typically default on credit cards first when overwhelmed by debt since it does not immediately threaten their vehicle or home. This pattern means credit card debt delinquency can serve as a leading indicator of financial pressure, and it hit its highest level since the Great Financial Crisis in the first quarter of 2024. 10.70% of all credit card holders are now 90+ days delinquent on payments, one-in-six borrowers are using at least 90.00% of their credit card capacity, and 11.00% more are between 60-90% utilization. Individuals in both groups are also moving more quickly into delinquency than they were pre-pandemic. Auto loan delinquencies, which typically follow credit card defaults, are also rising and nearing their highest levels since the Great Financial Crisis.

Source: The Federal Reserve Bank of New York’s Household Debt and Credit Report

Although these few data points do not indicate that a recession is imminent, they imply consumers may soon start pulling back on purchases. Given that consumers drove more than the overall gain in GDP growth on an annualized basis last quarter, any pullback in spending could cause economic weakness ahead. Inflation and real consumer spending last week showed a pullback in consumption has already begun.

The Bureau of Economic Analysis (BEA) reported that, adjusted for inflation, consumers reduced their spending in March by -0.10%, which was the slowest growth since August 2022. Likewise, the BEA report also indicated the Core Personal Consumption Expenditures Index (core PCE inflation) slowed to its lowest month-over-month increase of the year at 0.20%. Core PCE also increased at 2.75% over the last year, which was its slowest growth since March 2021.

For the Federal Reserve, the lower inflation figure and weakening consumer is good news for their fight against inflation and provides further data to support a potential rate cut in the latter half of this year. Since the inflation report aligned with market expectations, rates were largely unchanged for the week. The two-year Treasury rate closed the week on Friday at 4.87%, down about seven basis points from the prior week, and the 10-year Treasury closed the week up on Friday at 4.50%, up about three basis points from the prior week. The market still broadly expects one-to-two rates to occur this year, which suggests the market does not think a material slowdown will occur for consumers.

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About the author

  • Amol Dhargalkar

    Managing Partner, Chairman
    Global Head of Corporates

    Kennett Square, PA

    Amol Dhargalkar is a Managing Partner and Chairman for Chatham’s Board of Directors. He is the Global Head of the Corporates sector and brings over 20 years of experience in derivatives capital markets expertise.


Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit