U.S. consumers will soon wake up to ‘out of control’ interest on their credit cards, economist says

Fall in consumer spending major risk to U.S. economy in 2024, economist says

The U.S. economy should be able to avoid a recession next year — but a sharp pullback in consumer spending is among the biggest risks of that occurrence, according to economist Carl Weinberg.

Consumers are just waking up to the fact that they’re financing their spending by running up their credit cards, and that the interest on those credit cards is over the top, out of control, off the hook right now,” the chief economist of High Frequency Economics told CNBC’s “Squawk Box Europe” on Wednesday.

“That’s going to lead to, I think, a retrenchment in consumer spending, as we get into the new year.”

Weinberg’s base case assumes a slowdown in growth, rather than a recession.

“But the risk is, and I agree it’s a nontrivial risk, that consumers get into trouble,” Weinberg said, noting figures from the New York Federal Reserve showing a rise in delinquencies on credit cards.

“Real incomes have just started coming back again, and not by nearly enough to cover some of the increases in the debt burdens that we’re seeing. So credit to the household sector, consumer credit cards, that’s where the downside risk is. That’s where the risk to this Goldilocks forecast is, and I’m watching it.”

“Goldilocks” scenario is one in which an economy is growing enough to avoid a recession and a negative hit to the labor market, but not so strongly that it fuels inflation.

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