The Rabid Capitalist

Professor Glenn A. Okun

There can be no doubt that the consumer has now been stretched to the breaking point.  The Rabid Capitalist has previously identified the multitude of threats to consumer spending (see https://therabidcapitalist.com/2023/10/20/trucks-ships-and-now-trains-the-big-point/,https://therabidcapitalist.com/2023/10/18/sinking-ships-empty-trucks-wtf-the-big-point/, https://therabidcapitalist.com/2023/10/16/disinflation-will-not-lift-the-consumers-mood/,  https://therabidcapitalist.com/2023/10/14/switchers-stop-quitting-and-the-smart-money-exits-office-reits-the-big-point/, https://therabidcapitalist.com/2023/10/10/the-consumers-high-wire-act-the-big-point/, https://therabidcapitalist.com/2023/10/11/the-rich-are-different-the-big-point/,  https://therabidcapitalist.com/2023/10/10/shipping-sinks-the-economy-will-stink-the-big-point/, https://therabidcapitalist.com/2023/10/04/charity-ends-at-home-the-consumer-is-under-pressure/, https://therabidcapitalist.com/2023/10/03/consumers-under-pressure-the-big-point/, https://therabidcapitalist.com/2023/09/28/the-consumer-has-been-in-trouble-since-the-second-quarter-the-big-point/, https://therabidcapitalist.com/2023/09/12/the-consumer-income-trend-signals-recession/, https://therabidcapitalist.com/2023/09/12/the-consumer-under-stress-the-big-point/, https://therabidcapitalist.com/2023/09/12/consumer-wellness-check-the-big-point/, https://therabidcapitalist.com/2023/09/06/consumer-fatigue/  and https://therabidcapitalist.com/2023/09/05/taking-the-pulse-of-the-consumer-luxury-watches/).  Car loan delinquencies are the latest evidence of consumer financial stress.  Elevated interest rates have increased the cost of car ownership.  The implications for consumer spending are dire. 

According to Fitch, the percentage of subprime auto consumers who were at least sixty days delinquent on their loans increased to 6.11% in September, the highest level since 1994.  This is the result of higher interest costs and car prices.  The Fed’s plan to keep interest rates higher for longer will cause the continuation of this disturbing trend.

The subprime borrowers’ payment problems are merely the tip of the iceberg.  The Rabid Capitalist expects this delinquency trend to continue and to infect other classes of borrowers.  Consumer spending cannot be expected to remain robust in the face of all of the identified threats.