Warning lights flash for US consumer strength as credit defaults rise | After years of robust spending there are signs that Americans’ wellspring of financial firepower is fading

> US consumers are showing increasing signs of financial stress as they brace for higher prices from the Trump’s administration’s tariffs on imports, raising concerns about a crucial driver of the US economy.

> In first-quarter earnings, JPMorgan said the portion of loans in its credit card business deemed unrecoverable rose to a 13-year high.

> Industry-wide, the rate of charge-offs is now higher than the level before the Covid-19 outbreak, reversing a period of stellar credit card payments during the pandemic when consumers benefited from government stimulus programmes.

> Consumer spending is the bedrock of the US economy, and after years of robust strength there are growing signs that Americans’ wellspring of financial firepower is fading. That poses a risk to economic growth at a time of rising prices and higher interest rates, amid greater concerns that the US economy may tip into a recession in the next 12 months.

> A report earlier in the week by the Philadelphia branch of the Federal Reserve showed the share of US credit card borrowers making only their minimum required payment hit a 12-year high at the end of 2024.

> The Philadelphia Fed said the percentages of credit card accounts that were 30, 60 and 90 days past due had also increased in the fourth quarter.

> “Collectively, these trends, along with a new series high for revolving card balances, indicate greater consumer stress,” the central bank’s Philadelphia branch wrote.