Consumer Spending Still Strong Despite Economic Indicators, Says NY Fed
Despite some weakening economic indicators, consumer spending remains robust, according to researchers from the New York Federal Reserve who shared their insights on Tuesday. Total credit card balances saw a rise of 5.7% in 2025, and the amount of debt that slid into delinquency declined. However, sharp upticks in credit card debt, especially when it goes bad, can signal that consumers are struggling with basic spending.
Delinquencies Plateau at Elevated Rates
By the end of 2025, credit card delinquencies mostly held steady. Still, these levels of sour debt are plateauing at elevated rates, suggesting that certain sectors of the economy aren’t as strong as others. Researchers found that younger borrowers and those with lower incomes are shifting into delinquency more than other consumer segments. This supports a well-established narrative that Americans closer to the top of the income ladder are faring well, while those nearer the bottom are encountering more problems.
The K-Shaped Economy
The economy overall appears to be holding up, but the picture changes when you take into account the differing experiences of different groups. “When you look at how it differentiates amongst different groups of people, you see evidence consistent with a K-shaped economy, where … some groups are really struggling,” said a New York Fed researcher. Credit card balances rose 5.7% over the course of 2025, to $1.28 trillion, but that annual increase was smaller than the 7.3% rise from 2024 to 2025.
Bankers Report Strong Credit Quality
Bankers generally reported that credit quality was strong in the fourth quarter of 2025. CEOs from major financial institutions such as PNC Financial Services Group, JPMorganChase, and Capital One Financial expressed positivity regarding the health of borrowers for 2026. Capital One Financial CEO Richard Fairbank, for instance, said his company was leaning into growth opportunities based on the health of the economy and the consumer.
Consumer Behavior Versus Sentiment
Despite weak consumer sentiment, Bank of America CEO Brian Moynihan said that consumers spent 5% more money at the nation’s second-largest bank in January 2026 than they did in January 2025. Moynihan also noted a discrepancy between consumers’ sentiments and their behavior, saying “Look at what people do, not what they say they’re going to do.”
Perceived Probability of Missing Debt Payments
The average perceived probability of missing a minimum debt payment over the next three months decreased in January to 13.7% from 15.3% in December, according to data released by the New York Fed on Monday. However, the January figure was slightly above the trailing 12-month average of 13.4%.
Future Trends in Consumer Credit
While it’s clear that credit card balances are typically seasonally high in the fourth quarter due to end-of-year holiday shopping, the Fed researchers noted that they can’t parse how consumers are using their credit cards. If the next quarterly report shows that credit card balances fell to a lesser degree from the fourth quarter of 2025 to the first quarter of 2026, it could suggest that consumers carried over more debt and were using their cards on more need-based spending.
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