This is a good time to offer Americans credit. Economic growth is solid, unemployment is low, and wallets are open.
In July, retail sales grew at a sturdy 6 per cent from the year before, faster than analysts had expected. Nor does the spending seem to be especially reckless. When, at the beginning of last year, household debt surpassed its last peak, in 2008, many pundits speculated about the possibility of a new financial crisis. But US household debt — all $13.3tn of it, according to the New York Fed — is much lower, relative to both GDP and disposable income, than it was in the run-up to 2008.
The big card-issuing banks are pleased. In second-quarter calls with analysts several pointed out increases in consumer purchases with their cards and growth in loan balances.
At the same time, the current economic expansion, at the grand old age of nine years, is the second longest on record. That does not provide any particular reason to think it is near an end. But trees do not grow to the sky.
The competitive heat and the length of the cycle are making themselves felt in industry-wide data. Measure of credit quality, while not flashing amber, are unmistakably headed in the wrong direction.
Quarterly write-offs of bad credit card debt at US banks peaked at nearly $19bn in the first quarter of 2010 and bottomed under $5bn in 2015, according the FDIC. Since then they have crept back over $8bn.
Read more in the Milwaukee Business Journal.