Turkeys, inflation and the ability to pay off credit cards
Everyone loves universal holidays like Thanksgiving. In the United States, it is November 23 this year. Canada was a month earlier, on October 14. While many other countries do not honor turkeys and pilgrims, many have their versionwhere you relax and say “thank you”.
But in the United States, this year the cost of celebrating has actually decreased on a unit cost basis, in contrast to the increase in revolving credit card debt rates.
First the good news. According to American Farm Bureau Federation 38th According to an annual dinner survey, the average cost of feeding ten people at a Thanksgiving dinner fell 4.5% in 2023, from $64.05 to $61.17. That makes this year only $64.05, less only half the price of a McDonald’s Big Mac. The price of a Thanksgiving dinner in 2022 has skyrocketed compared to 2021, mainly due to the funky supply chain issues related to COVID-19. These were pipeline issues that have eased this year.
A measure to take into account in your credit policy forecasts for 2024: regional fluctuations
The most interesting question this year is the difference between regional costs. According to the American Farm Bureau Federation, “the cheapest food region for Thanksgiving dinner is the Midwest at $58.66, followed by the South at $59.10, the West at $63.89 and the North -Is the most expensive at $64.38”.
The Farm Bureau emphasizes the importance of SNAP program in the United States, an interesting topic we discussed in a recent Javelin Impact Note. “On the nutrition assistance side, many families can put dinner on the table through farm bill programs like the Supplemental Nutrition Assistance Program (SNAP). In 2022, an average of 41.2 million Americans received SNAP benefits at some point, or 12.6% of the U.S. population.
Turkey eats less and credit card debt rises
Total revolving debt, which mainly concerns credit cards, increased from $1.17 trillion in the third quarter of 2022 to $1.29 trillion in the third quarter of 2022, an increase of 10%, as Turkey dinners have declined. The only conclusion that can be drawn is that household budgets are under pressure, which we highlighted more than a year ago. Of course, inflation is rising, as are interest rates, but household budgets are tighter than ever. Overall, this translates to credit card risk.
So enjoy the turkey, but watch out for charge-offs in 2024. It will be a very difficult year for credit risk management.
