The American economy keeps on keeping on because consumers keep spending. But there are reasons to believe that they will start to cut back. Households are burning through their pandemic saving and access to cheap credit is dwindling as interest rates rise. The figure below from Moody's shows that younger Americans have been piling on auto and credit card debt to support their consumption. Moody's is concerned that credit is tightening and the good times may be coming to an end. This will not only slow the whole economy, it will pose a challenge for state and local governments who depend on revenue from sales taxes.
Source: Moody's US Public Finance
Allison Schrager is a senior fellow at the Manhattan Institute. Follow her on Twitter here.
Interested in real economic insights? Want to stay ahead of the competition? Sign up for our weekly newsletter here.
Photo by BeritK/iStock