TransUnion’s latest quarterly study found most Americans could be experiencing a ‘personal recession,’ with 54% stating their incomes were not keeping up with inflation.
TransUnion’s quarterly study in Q4 2022 includes responses from 2,835 U.S. adults between November 1-9, 2022, and is based on consumers’ viewpoints on current spending, debt, and future household budgets. This is used to evaluate how consumers’ finances have varied and forecast future changes.
A part of the survey concerned inflation causing a ‘personal recession’ for consumers. While only 35% of consumers reported the U.S. economy was currently in a recession, most Americans could be experiencing a ‘personal recession’; 54% reported their incomes were not keeping up with inflation.
“Rapidly increasing interest rates and stubbornly high inflation combined with recession fears represent the latest in a series of significant challenges consumers have faced in recent years. It’s not surprising then to see pronounced increases in delinquency rates for credit card and personal loans, two of the more popular credit products,” said Michele Raneri, Vice President and Head of U.S. Research and Consulting at TransUnion.
“Yet, many consumers –from a credit perspective – are in a better position than they were just a few years ago, equipped with the credit they can use in case of more macroeconomic challenges. We expect demand for credit to continue to be high, with lenders positioned well to meet it. While unemployment will likely rise next year, it should remain relatively low, a key element for a healthy consumer credit market.”
Their survey found that half (52%) of Americans were optimistic about their household finances in the next 12 months. Furthermore, most surveyed consumers said their incomes remained unchanged in the last three months.
What stands out on top for consumers next year?
TransUnion’s study showed consumers would continue to turn to credit cards, with 53% looking to apply for or refinance their existing credit card.
Paul Siegfried, Senior Vice President and Credit Card Business Leader at TransUnion, said, “However, it’s important to put the current credit card marketplace in perspective. When taking 2022 out of the equation, more consumers will gain access to credit cards in 2023 than in any other year in the last decade.”
“TransUnion expects 14 million more credit cards to be issued in 2023 than in 2019, a strong year for the consumer credit market,” Siegfried said.
“Such access provides consumers with more cushion in case of any macroeconomic challenges. Credit card balances are forecast to rise over the year as many consumers continue to turn to cards to help them manage cash flows. We expect card delinquency to increase in 2023 as consumers face liquidity shortages from the prolonged high inflation environment, slowing wage growth, and expected increases in unemployment.”
Their study forecasts there will be delinquency rates higher than ever in 2023 since 2010 for credit card and personal loans.
Also standing out, the study shows 22% will take out a personal loan. And 23% will apply for a new car loan or lease.
“Consumer lending unsecured personal loans had an unprecedented run-up, it all started during covid during the second quarter of 2020, and the fintechs pulled back really quickly, faster, and more dramatically than any other asset class. This is a testament to how quickly they can turn on and turn off the spigot of loans,” said Liz Pagel, Senior Vice President and Consumer Business Leader at TransUnion.
She explained, “what’s really remarkable is at the end of Q3 of 2022, we hit 210 billion in balances on unsecured personal loans, and the previous peak was in Q1 2020 of 159 billion, so that is a tremendous amount of growth in personal loans. Amidst all of this, we do see delinquencies coming up, increasing unemployment and inflation will affect these consumers.”
Ricquel Newman is a freelance journalist in the San Francisco Bay Area. Prior she was a past journalist for the award-winning consumer news unit, "Seven On Your Side" at ABC7 News in San Francisco. During her 15-year career with ABC News, she produced, managed, and handled all social media for the department. A two-time Emmy Nominee for undercover investigations and light news story features. She is a past radio producer for The Costa Report, a nationally syndicated radio show. Ricquel has a strong passion for news, writing, and creating. She also started her own PR Company at one point. She studied Radio and Television with an emphasis on Broadcast Journalism at San Francisco State University.