Consumers have tightened their credit spending in January, showing a significant slowdown in credit balance growth. Recent data revealed that the outstanding U.S. consumer credit balance increased by $18.08 billion, a 51.2% decline from December’s figures.
However, this rise exceeded the expectations of analysts, who predicted an increase of $14.5 billion. Delving deeper into the Federal Reserve’s report, it is evident that the total non-revolving credit balance, which encompasses major purchases such as vehicles and tuition, expanded by $9.10 billion, marking a 43.8% decrease from the previous month.
Meanwhile, the revolving credit balance, which primarily includes credit cards, rose by $8.99 billion, reflecting a 56.9% drop from December’s growth. Several factors likely contributed to this slowdown in consumer spending.
Among them was an arctic blast that brought exceptionally cold temperatures to many regions, as well as the typical post-holiday tightening of budgets that often occurs in January. Additionally, uncertainties stemming from President Donald Trump’s unpredictable tariff policies, significant layoffs such as those involving mass DOGE job cuts, and a crackdown on immigration have further unsettled consumers.
As a result of this instability, consumer confidence appears to have waned. The savings rate, often a reflection of consumer anxiety, has increased, and retail sales have not met expectations.
Major retailers like Walmart and Target have reported signs of declining consumer demand. Compounding the situation, the Commerce Department noted a decrease in personal expenditures for the first time in nearly two years on February 28.
Given these trends, outstanding credit balances may continue to decline in the upcoming months. It will be interesting to observe how these changes unfold in the near future.