Philadelphia Fed: credit tightening affects US consumption, spending decreases for low credit score people.

A new report released by the Philadelphia Federal Reserve shows that in the U.S. economy, the growth of credit card spending is increasingly driven by borrowers with high credit scores, while consumers with poor credit conditions have reduced their spending. According to data from large banks' credit card and mortgage loans in the second quarter of this year reported by the Philadelphia Federal Reserve, after adjusting for inflation, the purchase volume of borrowers with credit scores of 720 and above has remained at roughly the same level since 2023. In dollar terms, this series of data has reached a historical record high. However, the situation is different for borrowers with lower credit scores. The Philadelphia Federal Reserve stated that the purchase volume of borrowers with credit scores between 660 and 719 has actually decreased by 5.4% compared to 2023, while the purchase volume of those with the lowest credit scores has decreased by 8.5%. These two groups of people are roughly equal in number, accounting for one-third of all credit card accounts. This study is the latest manifestation of the wealth disparity between the affluent and low-income classes in the U.S. economy, during the ongoing economic expansion after the pandemic (which has lasted for more than five years). Wealthy families have seen a significant increase in consumption due to the additional income from the growth in wealth resulting from the considerable rise in the U.S. stock market; while low-income families have been most severely impacted by inflation, particularly in terms of food prices. The latter group of people may currently be facing difficulties in obtaining credit. Researchers at the Philadelphia Federal Reserve wrote: "The decrease in actual spending by consumers with lower credit scores may reflect a stronger consumption restraint due to poor household financial conditions, or these borrowers may be limited by their limited credit limits, some of which may already be fully utilized or close to the maximum." Other studies also indicate that economic pressures have begun to affect high-income families. Overall, the Philadelphia Federal Reserve team found that in the second quarter, the number of accounts with overdue payments had decreased, thanks to stricter loan approval policies and relatively low unemployment rates, resulting in a decrease in non-performing loan rates. Consumer spending accounts for about two-thirds of total demand in the U.S. economy. While official statistics cannot be published temporarily due to the government shutdown, data from the private sector (including credit card data) shows that overall spending slowed in September, following a strong performance in spending data throughout the summer. The latest economic "Beige Book" report released by the Federal Reserve on Wednesday also noted a "slight decline" in retail consumption in recent weeks. Philadelphia Federal Reserve President Anna Paulson stated earlier this week that consumption is increasingly dependent on high-income families. The Philadelphia Federal Reserve's survey of "large banks" covers the business operations of lending institutions with total assets exceeding $100 billion.