For Consumers, Food as the Breaking Point?

 
With recent reports of Costco and Wal-Mart limiting the amount of rice their customers may buy per trip, it would appear that Americans too are feeling the pressure of the global increase of food costs.

In an April 18 to April 20 poll conducted by Gallup, 46 percent of Americans reported that the current cost of food was causing them financial hardship. When broken down by income, 28 percent of respondents making $75,000 or more said that food price increases were causing them financial hardship, while 50 percent of respondents making $30,000 to $75,000 agreed with that statement.

But of all respondents those who described being most heavily burdened by the rising cost of food were Americans making less than $30,000 a year, the lowest income demographic, with 64 percent of this group reporting that food prices were causing financial hardship.

The bad news for consumers has been spelled out in a recent three-part series of statistical analysis from Trend Data, a database of 27 million anonymous consumer records sampled from TransUnion, the consumer information house. Trend Data uses the database to create a quarterly consumer lending analysis with a focus on the credit card, auto loan, and mortgage sectors.

In the auto loan arena, Trend Data projected that the national 60-day auto loan delinquency rate would rise by 33 percent through 2008 to reach 1.05 percent at year’s end.

Trend Data also projected that the national 90-day user delinquency rate on bankcards would increase to 1.9 percent by the end of 2008 from 1.36 percent in the fourth quarter of 2007.

Consider the fact that from 1983 to 2004 growth in credit card use was sharpest among families making $30,000 year or less, rising from 11 percent to 37 percent of families in 2004, suggesting that any additional financial pressure this year on these households carries additional risk of default.

Trend Data also projected that the national 60-day mortgage delinquency rate would increase from the nearly 3.0 percent reported in the fourth quarter of 2007 to 4.0 percent by the end of 2008, a 33 percent increase.

Consumer economic perception may not exactly match consumer economic reality but one thing is for certain – Americans are indeed finding it harder to pay their debts. Whether this trend continues throughout the year remains uncertain, but the impact to creditors and their agency partners is sure to be felt.