THE US CONSUMER ECONOMY IS RUNNING ON CREDIT.
25% of buy now pay later users are now taking loans to buy groceries.
At the same time, 41% of BNPL users reported missing at least one payment in the past year, up from 34% a year earlier.
More Americans are borrowing just to reach the next paycheck. Consumer spending still looks strong in economic data. But much of that spending is being supported by debt.
U.S. credit card balances have reached a record $1.14 trillion, while delinquency rates are rising toward levels last seen after the 2008 financial crisis.
GDP growth also looks stronger because government spending and healthcare costs are counted as economic expansion.
When large fiscal spending and inflation driven sectors are removed, underlying private economic growth has been close to flat over the past year.
Unemployment near 4% also hides pressure in the labor market, as workforce participation remains below pre pandemic trends and many workers have stopped actively searching for jobs.
The result is an economy where consumption continues, but increasingly through credit instead of income growth.
The solution is not more stimulus or more borrowing.
Real wage growth, productivity investment, and lower cost of living pressures are what stabilize consumer balance sheets.
Because an economy driven by expanding credit can grow for a while.
But credit always has limits and when it stops, the consequences turn out to be really bad.