FICO to factor BNPL into credit scores this fall

In recognition of the increased use of Buy Now Pay Later (BNPL) programs by American consumers, FICO is launching a version of its credit scores that takes into account BNPL activity. The new credit scores are expected to be available in the fall of 2025. For individuals who struggle to qualify for traditional credit, factoring in BNPL transactions could be a way of building a credit history. Inclusion of those transactions will depend on whether the BNPL lender reports activity to the credit bureaus. The credit history will record BNPL and may be positive or negative depending on whether consumers pay on time. However, not all credit scores will include BNPL transactions. See article at Yahoo.com.

Mixed credit results for consumers in May 2025

The latest TransUnion Credit Industry Snapshot revealed both positive and negative trends for consumers in May. Average balances owed increased for credit cards and mortgages, but decreased for unsecured personal loans. Rates of serious delinquencies on payments rose for auto and unsecured personal loans, but declined for credit cards and mortgages. However, the falling rates of seriously delinquent accounts for credit cards and mortgages might prove short-lived. Serious delinquency rates for these forms of credit refer to those that are 90 days or more overdue. While those rates dropped in May, shorter-term delinquency rates rose for both credit cards and mortgages. That means more consumers with those forms of debt have fallen behind recently. See details at TransUnion.com.

Consumer confidence drops sharply in June 2025

The Conference Board’s Consumer Confidence Index fell by 5.5% in June. This erased roughly half of the progress made in May, leaving the Index substantially down for the first half of 2025. The component of the Index that measures current business and labor market conditions fell by 4.7% during June. The Expectations Index, which measures the economic outlook consumers have for the near future, fell by nearly 6.3%. This left the Expectations Index well down into a range that has traditionally been associated with recessions. Tariffs and inflation continue to be issues that weigh most heavily on people’s minds. See news release at Conference-Board.org.

Existing home sales sluggish in May 2025

The National Association of Realtors reported that sales of existing homes rose at a seasonally-adjusted pace of just 0.8% in May. Year-over-year, sales of existing homes declined by 0.7%. The sluggish pace of sales led to a 6.2% increase in unsold inventory on the market. That inventory now represents 4.6 months’ worth of supply. Different regions of the country experienced differing trends in existing home sales. For May, sales volume increased in the Northeast, Midwest, and South, while it decreased in the West. Year-over-year, sales increased in the Northeast and Midwest, while they declined in the South and West. See details at NAR.Realtor.

Home price growth cools in April 2025

The latest release of the S&P CoreLogic Case-Shiller U.S. National Home Price shows that home prices continued to grow in April, though at a slower pace than the previous month. The Index rose by 0.61% in April, compared with 0.77% in March. Year-over-year, national home prices are up by 2.72%. See home price data at SPGlobal.com.

2025 Q1 GDP drop deeper than first reported

The final estimate for the first quarter of 2025 Gross Domestic Product (GDP) showed that the economy’s decline during the quarter was worse than previously thought. The change in GDP was revised downward from -0.2% to -0.5%. The figures are reported at an annual pace and after seasonal adjustment. The decline in GDP during the first quarter indicates an abrupt slowdown in the economy, following a 2.4% annual growth rate in real GDP in the fourth quarter of 2024. It’s too early to tell whether this decline is just a temporary blip or a sign of the beginning of a recession. See GDP report at BEA.gov.

Mortgage rates dip for fourth straight week

30-year mortgage rates fell by 0.04%, to reach 6.77%. This was the fourth consecutive week in which mortgage rates have fallen, though in each case the moves have been slight. 30-year mortgage rates fell by a total of 0.12% in June. 15-year mortgage rates have also fallen for four weeks in a row. The decline in 15-year rates has totaled 0.14%, leaving them at 5.89%.

Personal income and spending declined in May

US personal income fell by $109.6 billion in May, a 0.4% decline. This is an ominous sign for the U.S. economy. With personal income falling, consumers began to rein in their spending. Personal consumption expenditures fell by 0.1% during May. Cuts to government benefit payments and loss of income by farm proprietors were cited as leading reasons for the decline in personal income. See report at BEA.gov.

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Retail sales took a hit in May 2025

U.S. retail sales suffered a bigger drop than was expected in May. Retail sales fell by 0.9% during the month, more than the expected decline of 0.6%. Year-over-year, retail sales were up by 3.3%, a substantial slowdown from the 5% gain through April. In part, the sharp drop in retail activity in May was a recoil from unusually strong activity the prior month. In April, consumers had rushed to buy big-ticket items such as vehicles to get ahead of new tariffs. Notably, auto sales declined by 3.5% in May. See article at MSN.com.

Fed dampens expectations for rate cuts again

The Fed entered 2025 expecting to make multiple rate cuts during the year. However, after its recently completed meeting, the Fed announced that it still isn’t ready to make its first rate cut of 2025. The Fed’s rate target remains 4.25% to 4.5%. Besides holding off on cutting rates, the Fed has also reduced its projections for future rate cuts. While the Fed still expects to cut rates by half a percent this year, its rate targets for 2026 and 2027 are not as low as previously. Last September, the Fed issued projections showing that it expected the Fed funds rate to drop to 3.4% in 2025, 2.9% the following year and remain at 2.9% in 2027. Those targets have since been elevated to 3.9% for this year, 3.6% for next year and 3.4% for 2027. See Federal Open Market Committee Statement at FederalReserve.gov.

Tariff fears eroded household wealth in Q1 2025

U.S. households and nonprofit organizations lost a combined $1.6 trillion in the first quarter of 2025. The loss of wealth was caused by the stock market’s decline due to concern over the impact of tariffs. Meanwhile, household debt rose by 1.9% during the quarter. See article at Reuters.com.

U.S. workforce faces labor shortage

The U.S. needs to add an average of at least 4.6 million workers a year between now and 2033 to maintain a workforce sufficient to meet the country’s needs. This is according to a new report by the Committee for Economic Development (CED), which is the public policy center of the Conference Board. The CED warns that policy changes to expand the labor force are needed to avoid a shortage of workers in the years to come. Policy changes it recommends include reforms to the Social Security earnings test, gearing immigration rules towards admitting qualified workers, encouraging flexible work arrangements and making childcare more readily available. See news release at Conference-Board.org.

First-time buyers now spend nearly 60% of income on mortgages

A new study from the JPMorgan Chase Institute shows that mortgage payments are now taking up 45 percent more of household budgets than they did in 2019. Home prices have increased by 50 percent over the same period, and mortgage rates have also risen. Both factors are pushing up monthly costs. For people aged 25 to 44, who make up most first-time homebuyers, a typical mortgage payment used to take up 40 percent of their disposable income. By 2024, that had increased to 57.5 percent. See article at Realtor.com.

Government agencies team up to fight fraud

Various federal banking agencies issued a joint announcement of intentions to coordinate efforts to fight fraud. The statement was issued by the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Federal Reserve. Besides the cooperation on the federal level, the statement signaled an intent to work with state regulatory agencies. A particular area of emphasis is check fraud, which has soared in recent years. See article at PaymentsDive.com.

Budget cuts affect collection of economic data

Citing a lack of resources, the U.S. Bureau of Labor Statistics (BLS) announced that it was cutting back on the data collection efforts that go into calculating the Consumer Price Index (CPI). The CPI is the most widely followed measure of U.S. price inflation. The data affects financial markets, cost-of-living adjustments and economic policy decisions. The BLS explained that it is reducing sample collection efforts, including suspending data collection in some cities. See announcement at BLS.gov.

Sales of new homes slowed sharply in May

Applications for mortgages to buy newly-built homes dropped 9% in May compared with the previous month. Completed sales of new, single-family homes suffered an even steeper drop, falling by a seasonally-adjusted 12.1% in May. The drop-off in May reverses a large jump in new home sales in April, and is more in line with the level of activity seen earlier in the year. Mortgage rates rose sharply in mid-April. This, along with a significant level of economic uncertainty and a growing inventory of existing homes for sale, is thought to have contributed to the sharp decline in new home sales in May. See commentary at MBA.org.

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Consumer inflation slows to 0.1% in May 2025

The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose by just 0.1% in May. That’s less than April’s 0.2% rise, and projects to a slower annual pace of inflation than the 2.4% rise in the CPI over the past 12 months. The core inflation rate, which excludes food and energy, was also 0.1% for May. The core rate is a little higher than the overall rate for the past 12 months, at 2.8%. The overall rate was kept lower by a 12% drop in the price of gasoline over the past year. See news release at BLS.gov.

Producer prices edge higher after two-month decline

The Producer Price Index (PPI) rose by 0.1% in May. Though that’s a mild increase, it represents a rise in the pace of producer inflation after the PPI declined in each of the two previous months. Prices for both goods and services both rose at the same 0.1% rate in May. Producer prices tend to vary more month-to-month than consumer prices, but eventually inflationary trends in producer prices tend to filter through to consumers. See news release at BLS.gov.

Tariff concerns lead businesses to pause spending and hiring

A survey by Provident Bank found that 70% of US business owners are “very” or “moderately” concerned about the impact of tariffs on their businesses. 42% said they plan to delay major capital spending, and 30% said they have stopped hiring. Overall, 55% of US business owners feel tariffs will hurt the economy. Despite all these concerns, 60% of business owners believe the economy will grow over the next six months. See article at BankingJournal.ABA.com.

Consumer outlook improves as inflation fears ease

The Federal Reserve Bank of New York’s monthly Survey of Consumer Expectations found that people’s financial outlook improved on a few fronts in May. The average inflation expectation for the year ahead dropped by 0.4%, to 3.2%. The perceived probability of losing one’s job sometime during the next year fell by 0.5%, to 14.8%. Household income is expected to grow by 2.7% over the next 12 months, up from 0.1% from the expectation in April. Debt fears calmed a bit, as the median probability of missing a debt payment over the next three months dropped by 0.5%, to 13.4%. Finally, spending is expected to grow by 5.0% over the year ahead. That is 0.2% less than expected in April, though it still exceeds the average of 4.9% over the past year, which means households would be raising spending faster than incomes and inflation. See summary at Federal Reserve Bank of New York.

Study links higher credit scores to better mental health

A study led by a Johns Hopkins professor found that people living in areas with higher credit scores are more likely to be mentally healthy. People who live in areas with excellent average credit scores had a 10.9% chance of showing signs of depression. For people in areas with mediocre credit scores, the depression rate rose to 13.7%. 14.9% of people in excellent credit areas reported feeling anxiety. In regions with mediocre credit scores, the rate of anxiety was 17.4%. The relationship between higher credit scores and better mental health was observed even after adjusting for income and demographic factors. See article at PublicHealth.JHU.edu.

Consumer credit use rebounds in April, led by credit cards

The Federal Reserve’s monthly report on consumer credit found that borrowing accelerated in April. Consumers had reined in borrowing during the first three months of the year, but their use of credit grew at an annual pace of 4.3% in April. It had averaged a pace of 1.3% during the first quarter. April also showed the return of a preference for revolving debt. This debt, mostly credit card balances, grew at a 7% annual rate in April, compared with a 3.3% rate for loan debt. This is concerning because revolving debt is generally more expensive than nonrevolving debt. All figures are adjusted for normal seasonal differences, so the arrival of Spring doesn’t account for the revival of borrowing. See consumer credit data at FederalReserve.gov.

Mortgage rates remain stable for ninth consecutive week

30-year mortgage rates eased by 0.1% last week, to 6.84%. 15-year rates fell by 0.2%, to 5.97%. The minimal change continues a streak of nine weeks in which 30-year rates have remained in a tight range of 6.76% to 6.89%. 30-year rates are now one basis point lower than when the year began, and 0.76% higher than the low point reached at the end of last September. See mortgage rate details at FreddieMac.com.

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Job growth slowed in May 2025

The Bureau of Labor Statistics reported that the US economy added 139,000 jobs in May. That marked a decline in employment growth from the 147,000 jobs added in April and from the monthly average of 149,000 over the past 12 months. In other signs of weakness for the job market, the estimates for employment growth in March and April were both revised down by significant amounts. Job growth in April was initially announced as 177,000 but has been revised downward by 30,000 to 147,000. Job growth for March was initially announced as 228,000. It was first revised downward by 43,000 to 185,000, and now has been revised downward again by another 65,000 to 120,000. In other words, job growth for March now seems to have been 108,000 lower than initially announced. See jobs report at BLS.gov.

Consumers hit the brakes on spending growth

The growth rate of consumer spending slowed drastically in April 2025. According to the latest report on Personal Income and Outlays from the Bureau of Economic Analysis, personal spending grew by just 0.2% during the month. This represents a sharp slowing from a 0.7% growth rate in March. Spending on services grew by 0.4% during April, but spending on goods declined by 0.1%. See report at BEA.gov.

Uncertainty weighs on economic growth

The latest Federal Reserve report on economic activity around the US showed that half of the 12 districts reporting to the Fed showed declines in economic activity since April 2025. Besides the six districts reporting less activity, three showed no change and three showed slight growth. The report found elevated levels of economic and policy uncertainty coming from businesses and households in all districts. This uncertainty has created greater caution in business and household financial decisions. See article at ABA.com.

US and global economies expected to slow

The Organization for Economic Cooperation and Development (OECD) released new economic projections for 2025 and 2026. Overall, the global economy is expected to grow at a 2.9% annual rate this year and next. That’s a slowdown from last year’s 3.3% growth and from the OECD’s previous forecast of 3.1% for this year and 3.0% for next year. The outlook for the US economy is also worsening. The OECD now forecasts that the US economy will grow by 1.6% this year and 1.5% next year. That’s in contrast to 2024’s 2.8% growth and the OECD’s previous forecasts of 2.2% this year and 1.6% next year. The OECD also warned that growth could slow further if tariffs are raised again. See article at Reuters.com.

Mortgage rates ease slightly

Both 30-year and 15-year mortgage rates dropped by four basis points last week. That left 30-year rates at 6.85% and 15-year rates at 5.99%. Mortgage rates have been relatively stable since mid-April. 30-year rates are now exactly where they were when the year began, and 14 basis points lower than they were a year ago. See rate details at FreddieMac.com.

Productivity declines for the first time since 2022

Non-farm business productivity fell by 1.5% in the first quarter of this year. That’s the first decline in productivity since the second quarter of 2022. Productivity declines can signal trouble for the economy. Lower productivity means it is becoming more expensive to produce goods and services, which can fuel inflation. Also, productivity tends to decline when demand slows, as businesses are no longer operating close to their full capacity. See productivity report at BLS.gov.

CEO confidence has plummeted since last quarter

According to a Conference Board survey of CEOs, the confidence level of American business leaders suffered the largest quarter-to-quarter drop in the history of the survey, which goes back to 1976. Geopolitical instability was cited as the leading business risk, followed by trade and tariffs. 82% of CEOs said economic conditions were worse than six months ago, compared to just 2% who said they were better. 64% of CEOs expect conditions to get even worse over the next six months, compared to 18% who expect them to improve. 83% of CEOs now expect a recession over the next 12 to 18 months. See news release at Conference-Board.org.

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Auto loan surge tied to tariff fears

The VantageScore CreditGauge reported that borrowing increased over the past year across all categories: auto loans, credit cards, mortgages and personal loans. Growth was strongest in the auto loan category. A VantageScore executive noted that “buyers appear to have accelerated their car purchases in anticipation of higher sticker prices due to the recently implemented tariffs.” Ironically, these accelerated purchases would have primarily benefited vehicle sales outside the US. In any case, the surge in auto loans has pushed borrowing in that category above pre-pandemic levels. See news release at VantageScore.com.

Americans feel stable but still wary of inflation

The Federal Reserve’s annual Survey of Household Economics and Decision-making found that 73% of adults described their financial situation as “okay” or “living comfortably.” This result was up slightly from the year before, but below the recent peak of 78% in 2021. Inflation remained the leading concern of consumers. 29% rated the national economy as “good” or “excellent.” That was up from 22% in 2023, but below the pre-pandemic level of 50%. Parents continue to face high childcare costs. Just over half of parents paying for childcare said it cost more than 50% of what they spend on housing. In light of those high childcare costs, 46% of parents of children under age 13 use unpaid childcare provided by someone other than the child’s parents, compared with 24% who use paid childcare. The newly released data come from a survey taken last October 2024, so the results reflect perceptions of the economy at that time. See report at FederalReserve.gov.

Confidence rebounds slightly in May 2025

The Conference Board’s Consumer Confidence Index had its first increase in May following five straight months of declines. The index rose by 14% in May, but remains well below where it was when the five-month slide started. The expectations component of the index remains depressed to a level that has traditionally been associated with recessions. The survey found that consumers are far more concerned about the affordability of wants and needs than job security. In terms of the impact of economic uncertainty on consumer behavior, 19% of respondents said they had made purchases sooner to get ahead of tariffs. On the other hand, 26% said they had cancelled or postponed major purchases. See news release at Conference-Board.org.

Credit scores predict overdraft risk

A Federal Reserve Bank of New York study found that low credit scores are the best predictor of whether bank customers are likely to overdraft their accounts. Only about 20% of bank customers ever overdraft their accounts. As has often been cited before, income level and ethnicity are related to the likelihood of overdrafts. However, when adjusted for credit scores, different income and ethnic groups tend to have roughly the same incidence of overdrafts. Variation in credit scores more closely predicts the probability of an overdraft. This probability is highest among people with credit scores below 620. That probability drops with each step up in credit score tier. People with scores below 620 are 50% more likely to have overdrafted a bank account than those with scores above 760. See report at NewYorkFed.org.

GDP revision confirms early 2025 slowdown

The Bureau of Economic Analysis put out a revised estimate that showed the economy shrank at an annual rate of 0.2% in the first quarter of 2025. That estimate is net of inflation and after seasonal adjustment. The decline of 0.2% marked a sharp reversal after a solid 2.4% growth rate in the fourth quarter of 2024. The latest estimate was the second of three planned official Gross Domestic Product estimates. See news release at BEA.gov.

Home prices up for third straight month

The latest update of the S&P CoreLogic Case-Shiller National Home Price Index showed that home prices rose by 0.76% in March. That was the third monthly increase in the index, after it declined overall in the second half of last year. Home prices have risen by 1.34% in 2025 and 3.37% over the past 12 months. See data at SPGlobal.com.

Mortgage rates keep climbing

30-year mortgage rates rose for a third consecutive week. They increased by three basis points over the past week to 6.89%. That’s their highest level since early February. 15-year mortgage rates also had a slight increase last week, rising by two basis points to 6.03%. Revived inflation fears have pushed mortgage rates substantially higher since their recent low point at the end of last September. See mortgage data at FreddieMac.com.

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Moody’s joins other agencies in U.S. credit downgrade

In May 2025, Moody’s Ratings became the third of the three major institutional credit agencies to downgrade U.S. debt. Credit agency grades are an assessment of the reliability of the borrower. As with individuals, institutions such as the U.S. government that borrow money may have to pay higher interest rates if their credit ratings are lowered. In this case, the reduced rating could result in higher U.S. bonds, notes, and T-bill yields. That translates to higher borrowing costs for the government. The Moody’s report stated that its decision was based on the fact that the U.S. has debt and interest payments that are a much higher proportion of its revenue than other top-rated countries. Moody’s also noted that the extension of the 2017 Tax Cuts and Jobs Act, currently under consideration in Congress, would add $4 trillion to the deficit over the next decade. In cutting the U.S. credit rating, Moody’s joins Standard & Poor’s and Fitch Ratings, which had previously downgraded U.S. debt. See article at Yahoo.com.

Capital One completes $35B Discover acquisition

Capital One announced that it completed its Discover purchase, following regulatory approval in April 2025. This concludes a process that took 15 months from the initial announcement of the intended purchase. The takeover creates the largest credit card issuer in the U.S. as measured by loan volume. Customer accounts at both institutions will remain unchanged for now. However, customers should remain alert to notifications of possible changes in the months ahead. See article at Yahoo.com.

Delinquencies ease slightly, but debt balances continue to rise

The April 2025 Credit Industry Snapshot from TransUnion found that payment delinquencies eased for auto loans, credit cards, mortgages, and personal loans. Even the troubled subprime credit card category showed improved payment performance. The percentage of subprime credit card customers whose payments were 90 days or more overdue was 21.06 percent in April. While still high, that figure marks an improvement from 21.86 percent in March and 23.08 percent a year earlier. However, not all the news on consumer debt was encouraging. Average balances owed increased for credit cards, mortgages, and personal loans. See report at TransUnion.com.

Klarna reports rising BNPL losses in first quarter

An earnings release for the first quarter of 2025 from Buy Now Pay Later (BNPL) leader Klarna showed that losses from unpaid bills are mounting. More consumers are turning to BNPL as conventional credit becomes maxed out, but a growing number are finding it challenging to keep up with payments. Klarna reported consumer credit losses of $136 million in the first quarter, up 17 percent compared to the same quarter in 2024. The growth rate for losses outpaced Klarna’s growth rate for revenues. The consumer credit losses were high enough to result in a $99 million net income loss for Klarna in the first quarter. See article at NBCNews.com.

Fed survey shows consumers still use cash, but habits are shifting

A 2024 Federal Reserve Bank of Atlanta study found that cash usage has declined steadily but remains fairly common. In 2024, consumers used cash in 14 percent of their transactions. This was down from 16 percent the previous year and 19 percent back in 2021. In total, 83 percent of consumers reported using cash at least once within the past 30 days, down from 87 percent in 2023. Use of paper checks declined from 40 percent of consumers in 2023 to 35 percent in 2024. Credit cards were the leading form of payment, used in 35 percent of transactions. Debit cards followed closely at 30 percent. Payment cards are also gaining traction in bill payments, with credit cards used in 15 percent of those transactions and debit cards in 18 percent. The survey also found that ownership of crypto assets has declined for two consecutive years, from a peak of 9.6 percent in 2022 to 8.6 percent in 2023 and 7.7 percent in 2024. Finally, 71 percent of consumers reported using a mobile phone or tablet to make a payment in 2024, which has held steady since 2021. See details at AtlantaFed.org.

Mortgage rates rise to highest level since February

Thirty-year mortgage rates rose by 5 basis points last week to reach 6.86 percent, the highest level since mid-February 2025. Last week’s increase also pushed 30-year rates 1 basis point above where they were at the start of the year. Fifteen-year mortgage rates rose by 9 basis points last week, returning to just above the 6 percent mark at 6.01 percent. As with 30-year rates, 15-year rates are now 1 basis point above their early January level. See rate details at FreddieMac.com.

Mortgage application volume declines despite year-over-year gains

The recent rise in mortgage rates has cooled mortgage application activity. Overall application volume declined by 5.1 percent on a seasonally adjusted basis last week, according to the Mortgage Bankers Association. Despite the weekly slowdown, mortgage applications remain higher than a year ago. Refinance applications rose 27 percent from the same week in 2024, while purchase applications increased by 13 percent. See mortgage application release at MBA.org.

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Consumer outlook darkens in April survey

The April 2025 Survey of Consumer Expectations from the Federal Reserve Bank of New York showed economic gloom is increasingly clouding people’s outlooks. Consumers expect inflation to rise over the next three years. They anticipate that wage earnings and household income will fall. Respondents also foresee a rise in unemployment and a greater chance of missing a debt payment within the next three months. At the same time, they expect spending to grow faster than both income and inflation. See report at NewYorkFed.org.

Fed finds credit trouble spreading

A May 2025 report from the Federal Reserve Bank of St. Louis found that late credit card payments are rising across a broad range of households. Delinquencies are highest in the lowest 10 percent income areas but are also climbing in the top 10 percent. The share of credit card debt in delinquency is approaching levels seen during the 2008 financial crisis. More people are now behind on payments than during that period. See report at StLouisFed.org.

U.S. and China hit pause on tariff hikes

As of mid-May 2025, the U.S. and China have agreed to delay the harshest tariff increases they originally announced. Instead of the 145 percent rate outlined in April, the U.S. will impose a 30 percent increase over the next 90 days. China, in turn, will limit its tariff hikes to 10 percent instead of the threatened 125 percent. It is a temporary reprieve, but it signals both countries are at least willing to negotiate rather than escalate. See article at Reuters.com.

Banks tighten up credit card lending

The Federal Reserve’s May 2025 loan officer survey showed lending standards for most types of consumer credit were unchanged in the first quarter. However, banks tightened the standards for credit cards. Some also reduced credit limits, a clear sign of growing caution. Demand for most types of consumer loans weakened during the same period, though demand for auto loans stayed about the same. See loan officer survey report at FederalReserve.gov.

Card delinquencies hit post-recession high

In the first quarter of 2025, credit card delinquencies rose to 12.31 percent, the highest level since early 2011, when the country was still emerging from the Great Recession. Total consumer debt climbed to 18.2 trillion dollars, up 167 billion dollars from the previous quarter. Card balances dipped slightly, which is typical after the holiday season. Auto loan balances also declined, while balances for mortgages, home equity loans, and student debt rose. Student loan delinquencies jumped following the return of federal reporting, but at 7.74 percent, the rate remains below its pre-pandemic peak. See report details at NewYorkFed.org.

Inflation ticks up but stays mild

Consumer prices rose 0.2 percent in April 2025, following a slight dip in March. That brings the annual inflation rate to 2.3 percent, a relatively modest pace. New tariffs have yet to significantly affect pricing, as businesses continue working through older inventory and exemptions. Core inflation, which excludes food and energy, also rose by 0.2 percent in April and is up 2.8 percent over the past year. See Consumer Price Index summary at BLS.gov.

Retail sales growth nearly stalls in April

According to an early estimate from the Census Bureau, retail sales in April 2025 rose by just 0.1 percent. That is a sharp slowdown from the 1.7 percent surge in March, when consumers rushed to buy ahead of expected tariffs. The auto industry shows the swing clearly. Sales jumped 5.5 percent in March but fell by 0.1 percent in April. With tariff policy still in flux, more erratic swings in consumer spending may follow. See report at Census.gov.

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Parents fuel gig economy spending

Households with children are likely to remain among the heaviest users of gig economy services such as ride sharing and food delivery. A new TransUnion survey finds that these households are nearly five times more likely than those without children to spend $500 or more per month on such services. In the survey, 23% of families with children reported this level of spending, compared to just 5% of child-free households. Delivery of prepared foods is the most frequently used service, with 61% of households with children using it at least once a week, versus 40% of those without children. Retail deliveries, including groceries, are the second most common, used by 54% of families with children and 33% of those without. See news release at TransUnion.com.

Consumer debt returns to growth in March 2025

Consumer debt resumed its upward trajectory in March, according to the Federal Reserve, rising at a 2.4% annual pace — more than enough to offset February’s slight decline. In a shift from recent patterns, nonrevolving debt, which includes loans, grew faster than revolving debt, such as credit card balances. While revolving debt is typically more expensive, nonrevolving debt increased at a 2.7% annual rate, compared to 1.7% for revolving debt. See consumer credit report at FederalReserve.gov.

1 in 5 student loans now seriously delinquent

About one in five federal student loans is now 90 days or more past due, according to a new TransUnion study — the highest serious delinquency rate the agency has ever recorded. The data excludes borrowers in forbearance or deferment, meaning the actual number of those behind on their original repayment schedules is likely higher. The report comes as the Department of Education resumes referring delinquent loans for collection as of May 5. See article at Yahoo.com.

International travel to the U.S. drops 14%

Foreign travel to the United States declined by 14% year over year through March, according to the U.S. Travel Association. The drop is believed to stem in part from a more hostile political climate. The association estimates that each 1% decline in travel volume results in approximately $1.8 billion in lost revenue, underscoring the broader economic impact of reduced international visits. See article at USTravel.org.

U.S. productivity declines for first time in over two years

Business productivity in the U.S. fell at a seasonally adjusted annual rate of 0.8% in the first quarter of 2025, marking the first decline in two and a half years. The drop raises concerns on multiple fronts: falling productivity can contribute to inflation by reducing output per hour worked, and it may also signal an economic slowdown as companies cut production in response to weakening demand. See first quarter productivity report at BLS.gov.

Fed holds interest rates steady amid mixed signals

The Federal Reserve has left the federal funds rate unchanged at a range of 4.25% to 4.5% following its latest policy meeting. After cutting rates by a full percentage point late last year, the Fed still officially plans to lower rates by another 0.5% in 2025. For now, the decision to pause reflects the central bank’s effort to balance its dual mandate: supporting a cooling job market while keeping inflation in check. Although hiring has slowed, employment is still growing, and inflation, while easing, could rise again if tariffs pressure consumer prices. See Fed statement at FederalReserve.gov.

Mortgage rates hold steady despite market volatility

Despite recent turbulence in financial markets, mortgage rates have remained steady. Last week, 30-year fixed mortgage rates stayed within a narrow range of 6.76% to 6.83% for the fourth consecutive week, holding firm at 6.76%. Fifteen-year mortgage rates also showed little movement, slipping just three basis points to 5.89%. See rate details at FreddieMac.com.

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Job growth slows in April 2025

The Bureau of Labor Statistics reported that the U.S. economy added 177,000 jobs last month. That was down a little from March’s 185,000 new jobs. Also, the originally released figures for February and March were revised downward by a combined 58,000 jobs. Healthcare remained the biggest area of job growth, with 51,000 new jobs in April. The biggest decline was in government employment, which lost 9,000 jobs during the month. The report also noted that people on paid leave or still receiving severance pay are counted as employed, so the full effect of government job cuts may be felt later on.

Economy contracts in Q1 for first time in three years

The Gross Domestic Product (GDP) of the United States contracted at an inflation-adjusted annual rate of 0.3% in the first quarter of 2025. It was the first negative quarter for GDP in three years, and follows a 2.4% growth rate in the fourth quarter of 2024. The first-quarter GDP number declined despite being supported by a strong quarter for inventory investment, as companies sought to build up supplies in advance of tariffs. See GDP report at BEA.gov.

Fed eases up on bank crypto rules

The Federal Reserve has withdrawn previous instructions to banks about investments in crypto-assets. That guidance permitted banks to invest in crypto but warned them about the special risks of those investments. It also required banks to inform the Fed in advance of planned crypto activities. The risks the Fed had previously cautioned banks about included fraud, lack of clear ownership documentation, inaccurate representations by crypto-asset companies, and significant price volatility. The withdrawal of this guidance in April 2025 shows a new willingness to allow banks to learn about these risks by experiencing them. See announcement at FederalReserve.gov.

Moody’s downgrades D.C. credit rating

Moody’s Ratings has lowered the credit rating of the District of Columbia. The move is likely to cost the city more in interest on its municipal debt. The Moody’s report said they lowered the rating because federal government layoffs and budget cuts would erode the financial stability of the District over the next four years. See article at Yahoo.com.

Tariff impact expected to hit poorest households hardest

A new analysis by the Institute on Taxation and Economic Policy (ITEP), released in April 2025, shows that the burden from new tariffs would fall more than three times more heavily on poor households than on rich ones. At least some of the cost of tariffs is expected to be passed along to consumers. ITEP estimates that this will cost households in the lowest 20% of incomes an extra 6.2% of their income. Households in the lowest 20% are those earning less than $29,000 a year. Meanwhile, households in the top 1% are expected to pay an additional 1.7% of income due to tariffs. The top 1% are households earning at least $915,000 a year. See article at CNBC.com.

Home price growth slows in early 2025

The S&P Corelogic Case-Shiller National Home Price Index rose by 0.3% in February 2025. Over the past 12 months, the index is up by 3.9%. That’s down slightly from the 4.1% 12-month gain through January. Most of the gain occurred during the first half of that period, as price rises have slowed in recent months. Northern cities fared well over the past year, with New York showing the largest 12-month gain at 7.7%. This was followed by Chicago at 7.0% and Cleveland at 6.6%. At the other end of the scale, Tampa had the worst home price performance with a 1.5% decline over the past year. See home price index announcement at SPGlobal.com.

Mortgage rates dip again in late April 2025

Mortgage rates dipped slightly for a second consecutive week. Thirty-year rates fell by 5 basis points, to 6.76%. Fifteen-year rates fell by 2 basis points, to 5.92%. The latest changes leave both rates slightly below where they were at the start of 2025, but well above the low point reached at the end of last September. For example, 30-year rates are 9 basis points below where they were at the end of December, but 68 basis points above their level at the end of September. See rate details at FreddieMac.com.

Construction spending falls in March 2025

Total U.S. construction spending slowed by 0.5% in the month of March, compared to February’s level. Residential construction experienced a similar decline, slowing by 0.4% in March. However, both total and residential construction are up by 2.8% from March of last year. See details at Census.gov.

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Corporate profits surge since COVID

A study by the Federal Reserve Bank of St. Louis shows that U.S. companies have made significant gains in the years since the pandemic began. This represents more than just a rebound from the initial economic slump. In dollar terms, corporate profits have more than doubled since 2010, with most of the growth occurring after 2019. Profits have outpaced overall economic growth, rising from an average of 13.9% of national income from 2010 to early 2020, to 16.2% since 2020. See summary at StLouisFed.org.

Debt collectors set to resume student loan pursuits in May 2025

The Department of Education announced it will begin referring delinquent student loan borrowers to debt collectors starting May 5. The department had already resumed reporting delinquent payments to credit bureaus, but referring the account to a collector is another major negative for credit scores. About 5 million of 42 million borrowers are currently in default. Borrowers may face consequences, such as wage garnishment, unless they resume payments or arrange a repayment plan with their servicer. See article at NYTimes.com.

Sharp drop in existing home sales in March 2025

Sales of existing homes fell by 5.9% in March, with homes selling at a seasonally adjusted annual rate of 4.02 million. The sales volume is 2.4% lower than it was a year ago. Despite the slowdown, home prices have risen year-over-year for 21 straight months, reaching an average of $403,700. Rising inventory could pressure prices, with unsold home supply increasing by 8.1% last month. The West had the steepest decline in sales, down 9.4%, while the Northeast saw a milder 2.0% drop. See home sales data at NAR.Realtor.

Mortgage rates dip slightly after sharp rise

After jumping 21 basis points the previous week, 30-year mortgage rates edged down by two basis points to 6.81%. Meanwhile, 15-year mortgage rates fell nine basis points to 5.94%, slipping back under 6%. Current 30-year rates are 4 basis points lower than at the start of 2025 but remain 73 basis points higher than their low point in September 2024. See rate data at FreddieMac.com.

Study shows shifting middle-class income ranges

A new Bank of America study reveals that the income thresholds for the middle class vary widely by household type. Overall, a household needs about $80,000 to reach the median. However, single-income households typically earn $60,000, while multiple-income households average $136,000 per year. Nearly 40% of middle-income households are headed by people aged 25 to 44. See article at Yahoo.com.

Loan delinquencies ease but remain elevated

TransUnion’s latest Credit Industry Snapshot shows that delinquency rates for auto loans, credit cards, mortgages, and personal loans declined slightly in March 2025. Even subprime loans showed improvement. However, delinquency rates are still up compared to a year ago, with auto loan delinquencies rising 4.6% and mortgage delinquencies up 19.2%. Mortgages and auto loans, backed by collateral, remain among the safer loan types despite recent trends. See details at TransUnion.com.

Home-buying confidence plunges

Survey data from the Federal Reserve Bank of St. Louis shows that confidence in buying a home has fallen sharply since last November. The Home Purchase Sentiment Index, which tracks views on home prices, mortgage rates, and personal finances, dropped 9.2% since November, including a 4.9% decline in March alone. The index now sits 11.3% below its historical average. See index data at StLouisFed.org.

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