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More consumers concerned about missing debt payments: Fed

Consumers are also finding it harder to access credit than a year ago, according to a New York Fed report

Summary

More consumers believed they had reduced access to credit in April 2020 compared to a year ago, according to new Fed survey. The survey also reports a decline in consumer expectations about the labor market and a variety of other inputs.

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More consumers believed they had reduced access to credit in April 2020 compared to a year ago, according to a Federal Reserve Bank of New York survey.

The regional Federal Reserve bank’s Survey of Consumer Expectations for April reveals 48% of respondents find accessing credit to be harder now than it was in April 2019, compared to the 32.1% who reported thus in March.

Consumers were also less upbeat about their prospects for accessing credit a year from now, with 46.7% expecting it to be harder, compared to the 38.8% who had this perception in March.

And they were more concerned about the possibility of missing a minimum debt payment in the next three months, with this figure rising for the second month in a row to 16.2% in April. This average probability is well above its trailing average for 12 months of 11.9%.

The survey found deterioration in a variety of other consumer expectation inputs.

“The perceived probability of losing one’s job reached a new series high for the second consecutive month,” the Fed said in its report. “Expected earnings, income and spending growth each reached series lows.”

And for the first time since the survey began in 2013, consumers at the median don’t see any increase in home prices in the next 12 months. Moreover, 44.2% of the respondents see a decline in home prices.

See related: Fed reports steep drop in credit card balances in March 

Pessimism prevails on employment outlook

Consumers’ outlook for labor market outcomes was also clouded by pessimism. Median expectations for wage growth were down to 1.8%, from March’s 2%. The decline in expectations was seen across all ages and income groups. Respondents have become a bit more optimistic about the unemployment outlook, though, with expectations that the unemployment rate will be higher a year from now down to 47.6%, from March’s series high of 50.9%.

Respondents remain pessimistic about their prospects for holding on to jobs, with the average expected probability of losing a job up 2.4 percentage points to 20.9%. Fewer respondents expect to voluntarily leave their job in the next year, with the average expectation for this measure down to a series low of 17.3%.

Consumers were also less optimistic about their prospects for finding another job within three months of a possible job loss. On average, this expectation was down 6.1 percentage points to 47% in April, the biggest month-to-month decline for the survey.

See related: Does collecting unemployment affect your credit score?

Inflation outlook remains clouded

Consumers anticipate that inflation a year from now will be at 2.6%, with the same inflation expectation for three years from now. But there is a lot of disagreement among the respondents about this measure, as seen in the differences in responses at the 25th percentile and 75th percentile of inflation expectations.

Consumers expect that gas prices a year from now will be higher, anticipating a 4.9% hike at the median, up 2.4 percentage points, after seeing a decline in gas price inflation for the past two months.

However, they continue to see declines in inflation for rent and college costs, with both of these costs expected to go up 4.6% in the year ahead, a series low for both. Food prices, at 5.4%, and the cost of medical care, at 9.3%, are expected to continue rising.

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Credit Card Rate Report Updated: October 21st, 2020
Business
13.91%
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15.50%
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15.85%
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15.75%
Student
16.12%

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