A crisis-like situation is brewing in the US with auto loan credit demand declining rapidly and the delinquency figure touching 26.7 per cent in December. Analysts the world over are keeping a close watch on the developments especially after the turmoil that the 2008-09 subprime crisis brought about.
According to Cox Automotive, a platform providing technology and market intelligence on the automobile sector 7.11 per cent of subprime loans in the US were severely delinquent in December. This was an increase from 6.75 per cent in the previous month. It added that though there has been an increase in the number of people who are missing the loan repayment schedules these have not yet manifested into defaults. A loan is categorised as default when the borrower fails to pay even after 90 to 120 days.
This might suggest that a default wave could be hitting over the next few quarters as consumers are tapped out by 20 months of negative real wave growth, depleted personal savings, and maxed-out credit cards, Oilprice.com said in a report.
The US economy, the world’s largest, grew by 2.9 per cent in the fourth quarter after registering 3.2 per cent growth in the third quarter. For the full year 2022, the US economy expanded 2.1 per cent. In 2021, it grew 5.9 per cent. Data showed that consumer spending fell 0.2 per cent in December compared to November. In December, prices rose 5 per cent compared to a year earlier, down from a 5.5 per cent increase in November.
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