More consumers expect to fall behind on debts, survey shows

Last month Americans grew more pessimistic about their financial situations, including their ability to pay off their debts, adding to an increasingly ominous economic outlook for banks.

The average U.S. household’s view of its own finances “deteriorated sharply” in April, according to a survey released Thursday by the Federal Reserve Bank of New York. Perhaps most concerning for lenders, the average respondent’s likelihood of missing a minimum debt payment, in their estimation, rose to 13.9% — up from 12.9% in April 2024.

This anxiety comes at a time when credit card delinquencies are rising. In the fourth quarter of 2024, the percentage of credit card debts that were 30, 60 and 90 days past due all increased, according to the Federal Reserve Bank of Philadelphia — and 90-day delinquencies set a new record.

“I think that things are trending in the wrong direction,” said Jay Hawkins, a senior economist at PNC Financial Services Group. “We have seen a sharp rise in credit card delinquency rates.”

Confidence fell in other ways in April, as well. Expected income growth dropped to a median of 2.6%, according to the New York Fed — its lowest point in four years. And among people looking for work, the perceived likelihood of finding a job fell to 49.2%, the lowest level since March 2021.

All this took place in a month that began with President Donald Trump’s April 2 unveiling of new tariffs on almost 90 countries. Since then, the president has sporadically paused or made exceptions to many of those levies, injecting the global economy with a high dose of uncertainty.

That unpredictability has led many banks and other businesses to pause major investments. But as the New York Fed’s survey shows, it may also be taking a toll on the outlook of average Americans.

“I think it’s all about tariffs,” Hawkins said of the souring sentiments. “Ultimately, if they do stay in place, no matter what form they’re in or what level, that’s going to increase costs, it’s going to increase inflation, and that’s going to be passed along to the consumer.”

So far, economic data has not shown a clear impact from the fluctuations in trade policy. The U.S. economy added 177,000 jobs in April, and the unemployment rate remained stable at 4.2%, according to the Bureau of Labor Statistics.

How consumers feel about the labor market, on the other hand, has already taken a hit. The perceived likelihood that unemployment will rise, according to the New York Fed, increased to an average of 44.1% in April — the highest it’s been since 2020.

“The hard data looks OK right now, but the soft data looks terrible,” said Mark Matthews, director of research at the National Retail Federation. “And historically, eventually the hard data catches up to the soft data.”

One possible reason for the gap between perception and reality, Matthews said, is that Americans are spending at healthy levels right now — in order to avoid future tariffs.

“Businesses are pulling forward their investment to get ahead of tariffs, just like consumers are pulling forward their spending to get ahead of tariffs,” he said. “Those pulled-forward purchases are future lost sales.”

Consumers told a more complicated story about inflation. In April, Americans’ expectations for inflation one year from now remained unchanged since March, the New York Fed found. For three years from now, expectations increased. And for five years from now, they decreased.

The muddled predictions in some ways reflected the uncertainty of the moment. Important inflation data for April, including the Consumer Price Index and Personal Consumption Expenditures, has not yet been released.

In any case, Trump’s tariffs will take time to make their mark on inflation, especially since many of them were paused for 90 days. For his part, Hawkins doesn’t expect to see the levies’ impact on the economy until at least this summer.

“The tariffs haven’t really bitten yet,” he said. “I think that will show up.”