In 2023, outstanding credit card balances in the United States surpassed $1 trillion for the first time. This milestone has raised concerns about the health of household finances and the implications for consumer spending going forward.

The FRED graph above shows three measures of credit card debt, with all balances normalized to 100 in the first quarter of 2011 to better illustrate longer-run trends: The blue line shows the balances, the green line shows the balances adjusted for inflation, and the red line shows the balances as a percentage of disposable income.

The blue line shows the growth in balances on credit cards and other forms of revolving credit issued by US commercial banks since 2011. In 2023 Q3, balances were 18.2% higher than at the start of the recession in 2020 Q1 and 34.8% higher than the post-recession low in 2021 Q1.

This growth in credit card balances since 2021 has occurred alongside substantial inflation. Measured by the consumer price index (CPI), inflation reached a peak annual rate of 8.9% in June 2022. In total, the CPI rose 20% between May 2020 and October 2023, which is close to the growth in total credit card balances over this period. What do we see if we look at “real” balances—that is, nominal balances divided by the CPI? As the green line shows, in 2023 Q3, “real” credit card balances were essentially equal to their level in 2020 Q1.

Are these higher balances putting increased pressure on household finances? That depends on several factors, including the growth in other types of household debt, interest rates, and disposable income. Between 2020 Q1 and 2023 Q3, nominal personal disposable income rose by more than nominal credit card balances. As the red line shows, relative to disposable income, credit card balances were actually slightly smaller in 2023 Q3 than they had been in 2020 Q1. Of course, interest rates have risen substantially over this period, so the cost of carrying a balance has increased.

This isn’t a full analysis of the state of household balance sheets, but the growth in outstanding credit card balances does seem less alarming when compared with the growth in household income over the same period. For more insights on this topic, check on US credit scores and credit use rates.

About the data: These data don’t include balances on credit cards issued by non-bank entities, but credit card debt is mainly held by banks, so this measure is pretty solid. Also, by convention, FRED graphs show quarterly data as occurring in the first month of a quarter. So the peak in credit card balances shows as occurring in January 2020, or one month before the beginning of the recession. However, based on weekly data, the peak in credit card balances occurred during the first week of March.

How these graphs were created: Search FRED for and select “Consumer Loans: Credit Cards and Other Revolving Plans, All Commercial Banks.” From the graph, click on “Edit Graph” and open the “Add Line” tab, then search for and select “Disposable Personal Income” and “Consumer Price Index for All Urban Consumers, All Items in U.S. City Average.” For the latter two lines, add the Consumer Loans series under the “Customize data” section and set the formula to 100*(b/a) by clicking “Apply.” For all three lines, set the units to “Index (Scale value to 100 for chosen date),” enter the date “2011-01-01,” and set the frequency to “Quarterly.” Set the earliest date in the window to “2011-01-01.”

Suggested by David Wheelock.

There are three ways to measure GDP:

• The expenditure approach adds private and public consumption, investment, and the trade balance. It’s the famous Y=C+I+G+X-M.
• The income approach principally counts labor income and profits.
• The product approach adds up each step of production.

All three measurements should add up to the same number. But, for various reasons detailed in this blog post, there’s always a small difference, called a “statistical discrepancy.” The ALFRED graph above shows this discrepancy as the proportional difference between GDP and national income. For the period just before and during the recent pandemic, that discrepancy went as high as 3%, for the first quarter of 2022.

Compare that graph with our second graph, which covers a more “normal” period. Here, the largest discrepancy is only 1.3%.

ALFRED’s job is to track “vintages” of data: In these graphs, the vintages are the values assigned to quarterly GDP. Those values for each given quarter were revised over time as more (and/or more-precise) information was collected.

During the “normal” period shown in the second graph, these revisions are minor compared with the revisions during the pandemic, shown in the first graph. This comparison highlights how difficult it was to compute the initial estimates of GDP and national income during the pandemic. Later vintages of the quarterly data had more typical discrepancies. This observation tells us that the BEA was able to adapt to the challenges of the pandemic quite rapidly and maintain the high level of accuracy in their data collection process.

How these graphs were created: Go to ALFRED, search for (nominal) GDP, click “Edit Graph,” search for (nominal) “national income,” and apply formula a/b-1. Finally, play with vintage dates and sample periods to obtain the two graphs.

Suggested by Christian Zimmermann.

The FRED Blog has discussed how changes in global commodity prices for coffee, tea, and cocoa have impacted the price of comfort drinks in the European Union. Today, we compare global and US consumer prices for sugar and discuss why they’re disconnected.

The FRED graph above shows three data series on sugar prices:

• The blue line is the domestic consumer price index for sugar and sweets. This is an index number, reported by the US Bureau of Labor Statistics, that measures the trend in the prices paid by US consumers.
• The red line is the world benchmark price for raw cane sugar ready to be shipped for export. The International Monetary Fund (IMF) uses data on sugar No. 11 futures contracts from Intercontinental Exchange (ICE) to report this price in US cents per pound. At the time of this writing, Brazil is the world’s largest exporter of raw cane sugar.
• The green line is the price of raw cane sugar for delivery at one of five designated US ports with refinery facilities. The IMF uses data on sugar No. 16 futures contracts from ICE to report this price in US cents per pound.

We customized the data to an index with a value of 100 in the first quarter of 1990, when the first IMF commodity price data are available, to better compare the changes in global commodity prices to the change in the US consumer price index. We can’t sugarcoat it: These indexes don’t tend to move in sync.

Between 1990 and 2009, the price of raw cane sugar delivered to US refineries was remarkably stable. During that period, consumer prices rose steadily while international prices bounced up and down. During the next several years, the US and the global prices for raw sugar moved in sync; but their spike in 2011 was not fully reflected in the domestic CPI in the US. Between 2020 and the time of this writing, the co-movement between rising raw sugar prices and rising consumer prices for sugar and sweets is more noticeable.

So, what’s the story behind the numbers?

This brochure about the ICE’s sugar futures contracts provides an overview of the international sugar market and the factors that hinder the free trade in this commodity. In short, the disconnect between international and domestic prices stems from subsidies to growers, import restrictions, and other regulations by producers and consumers organized in trade blocs.

Most recently, the US Department of Agriculture’s October 2023 “Sugar and Sweeteners Outlook” by Vidalina Abadam and David Marquardt describes how the exceptional drought conditions in the southern US are reducing the projected domestic sugar supply in 2023-2024. Trade partners are also experiencing droughts, and thus international commodity prices and domestic consumer prices are rising faster than in previous years.

How the graph was created: Search FRED for and select “Consumer Price Index for All Urban Consumers: Sugar and Sweets in U.S. City Average.” Next, click on the “Edit Graph” button and use the “Add Line” tab to search for and add “Global price of Sugar, No. 11, World.” Repeat the previous step to add “Global price of Sugar, No. 16, US.”

Suggested by Diego Mendez-Carbajo.