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U.S. consumers are starting to curb their spending in response to high prices and a worsening economic outlook, according to consumer finance company Synchrony Financial (SYF.N), opens new tab.
Americans have been accumulating more debt amid strain in their finances, with delinquencies edging up for auto loans, credit cards and home credit lines, the Federal Reserve said last month.
The belt-tightening indicates that Americans, whose finances are broadly healthy, are preparing for their finances to be more stretched, said Max Axler, chief credit officer of Synchrony. Most clients are still keeping up their loan repayments, he added.
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“Purchase volumes have gone down across the industry as consumers across all income groups become more thoughtful about spending,” Axler told Reuters.
Synchrony, which issues credit cards in partnership with retailers and merchants, has more than 100 million consumer credit accounts.
U.S. consumer sentiment plunged to a nearly 2-1/2-year low in March as inflation expectations soared. Some economists have warned that President Donald Trump’s sweeping tariffs could boost prices and undercut growth.
Concerns about higher prices have driven consumers’ long-term inflation expectations to levels last seen in early 1993.
Retailers including Target and Walmart have said that shoppers are being careful with their spending, waiting for deals or making tradeoffs to lower-priced items.
Household spending cuts could be a precursor to increasing late credit payments or loan defaults, analysts said. While default rates have remained broadly steady, spending is being watched carefully as an early indicator of deteriorating consumer finances.
“For the first time in five years, federal student loan delinquencies will start to reappear on credit files, and we expect a lot of consumers to be stretched due to this,” said Rikard Bandebo, Chief Economist at VantageScore.
“We expect delinquencies to go up as a result of it at a time when consumer debt is already high,” Bandebo added.
