Consumers' fears of missing payments hit record low, NY Fed says

Middle-aged consumers drove optimism hike, but outlook on labor market worsened

Fred O. Williams
Senior Reporter
Expert on consumer credit laws and regulations

Consumers' optimism hits new record, NY Fed says

Consumers’ optimism about their financial fitness just hit a record – at least concerning their ability to make debt payments.

People’s fears of missing a minimum debt payment fell for the sixth straight month in March. That’s according to the Federal Reserve Bank of New York’s Survey of Consumer Expectations released Monday.

Consumers put the odds of missing a payment within the next three months at 10.72 percent, on average. That was the lowest level since the survey started in mid-2013.

“The average perceived probability of missing a minimum debt payment over the next three months has decreased for six consecutive months to 10.7 percent in March, a new series low,” the New York Fed said in a news release.

Fears of late payments fall in March 2018

  • Average odds of missing a minimum debt payment within three months: 10.72 percent, down from 11.56 percent.
  • People ages 40 to 60 drove the improvement with a 3 percentage point decrease in fear of missing payments to 11.84 percent.
  • Among people under 40 and those 60 and over, fears of missing a payment increased slightly.

Middle-aged consumers more confident now about making payments

  • People age 40 to 60 saw the most improvement in their odds of making payments, driving the improvement in the average.
  • Those under age 40 saw their odds of making payments worsen somewhat, but byless than a percentage point.
  • People over 60 also saw their odds worsen slightly, although their expectation of missing a debt payment – 6.12 percent – was still the lowest of the three broad age groups.

Consumers less confident about job conditions

The nationally representative survey questions 1,300 households about their financial picture. It also asks consumers about their odds of facing higher inflation, losing a job, being turned down for credit, and other financial expectations.

The record optimism about making payments was not matched by other economic indicators, however.

“Consumers were less optimistic about labor market outcomes [than inflation],” the central bank said in a news release. Optimism about growth in paychecks declined from February, while fears of higher jobless rates increased.

With the jobless rate at an ultralow level of 4.1 percent, the survey may reflect people feeling that they are at the peak of an economic upswing – with further improvement unlikely.

While households feel their overall financial situation improved in March, “In contrast, expectations of households’ financial situations worsened,” the New York Fed said.

"Consumers were less optimistic about labor market outcomes [than inflation]."

Other results from NY Fed’s March survey:

  • The average likelihood of job loss in the next 12 months rose to 13.9 percent, from 12.8 percent.
  • The median expectation for household income growth decreased a slight 0.1 percentage points to 2.9 percent.
  • Perceptions of credit availability tightened – the percentage of respondents expecting credit to be easier to get in 12 months fell 3.3 percentage points to 19.4 percent.

Consumer confidence meets climbing debt, rising interest rates

The optimism about making debt payments gets support from some other data points. In the fourth quarter, delinquent credit card accounts reached a three-year low of 2.46 percent, the American Bankers Association said.

However, there’s reason to take the optimism about debt payments with a grain of salt. Consumer debts have been climbing steadily – surpassing pre-recession levels – while interest rates are going up as well, making debt more expensive to carry. 

See related: Guide to rising credit card interest rates



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Updated: 04-26-2018