Part 2: Incremental Interest Payments Squeeze Disposable Income

Sep 11, 2023 | Macro Insights, No Bull Economics

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In this post, we quantify the pressure on disposable income driven by credit card & auto loan payment increases since the onset of the Fed rate hikes in early 2022 in addition to the impact of the coming resumption of student loan payments in October 2023.


  • In our previous post, we analyzed how consumer income currently benefits from strong employment and healthy raises.
  • Further, we noted that a 3.5% personal savings rate suggests that consumers still have some cushion.
  • All the same, it is not surprising that current saving levels have been pressured by higher interest payments for both credit card & auto loans which we estimate have increased as a % of disposable income by +0.9% & +0.6%, respectively, since the Fed began hiking rates at the beginning of 2022.
  • Also, there is a lot of concern about the coming pressure on consumer spending that will be driven by the resumption of student loan payments at the beginning of October.
  • We estimate this $88B annual expense will further pressure total disposable income by 0.3% although we recognize that there will be a disproportionate impact on those consumers with larger student loan balances.
  • While it does look like consumers are keeping their heads above water for the time being, this outlook is contingent on the Fed taking a well-justified pause in further rate hikes that could otherwise push the most vulnerable consumers over the cliff.      

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