A record number of Americans reported finding it harder to obtain credit in August than one year ago, which could put a damper on consumer spending in coming months, according to a monthly survey by the New York Federal Reserve Bank.
Expectations of future credit availability also sank in the survey, which the bank launched in June 2013.
Consumer spending has been stronger than expected this summer, surprising Federal Reserve officials and financial markets.
Economists still expect the economy to slow. However, consumer spending, adjusted for inflation, rose 0.6% in July, so any slowdown wouldn’t start until the last three months of the year.
Banks have been tightening loan standards and terms of credit this year, especially following the collapse of Silicon Valley Bank in March. The regional-bank crisis showed clearly the difficulty banks face as they hold many low-interest-rate assets that are less valuable as a result of the Fed’s sharp increases in interest rates since early 2022.
According to the monthly survey, Americans’ perception of their financial situations generally worsened, with both current and year-ahead expectations declining.
The median expected growth in household income fell 0.3 percentage point to 2.9% in August, its lowest reading in over a year.
Median household spending growth expectations fell 0.1 percentage point, to 5.3%.
Worries about jobs also increased in August. The perceived probability of losing a job in the next 12 months rose by 2 percentage points to 13.8%, the highest reading since April 2021.
Inflation expectations were largely stable. Median one-year-ahead inflation expectations rose 0.1 percentage point to 3.6%, while the five-year-ahead inflation expectation index also rose slightly, to 3%.