Investors are keeping a close eye on the financial health of the U.S. consumer, which can make or break the economy, which in turn can make or break the market.

Consumers came into this year riding high with built-up savings from the pandemic as a result of stimulus and less spending with many normal activities put on hold as people hunkered down to try and prevent the spread of COVID-19. But now a lot of those savings have been spent due to high levels of inflation and consumers making up for lost time. Consumers are once again piling into debt, and rising interest rates have also made this debt more expensive.

With many experts forecasting a recession next year, it's very important to keep tabs on the consumer. Here is how consumer credit held up in November, which is the latest month we have data for.

Looking at credit card losses

One fairly simple way to look at the health of the consumer is through the lens of credit card losses. After all, this is where many consumers put a lot of their daily expenses. Therefore, if we start to see more losses, it means consumers are starting to struggle to cover their expenses.

The major credit card players will post their net charge-offs and delinquencies every month. A charge-off is a debt that is unlikely to be collected and therefore a good indicator of loan losses, while a delinquency is a borrower that is late on their payments. Delinquencies start once a borrower is 30 days late and turn into a charge-off once the borrower has been delinquent typically in the 90-to-180-day window -- it can vary. Here is how delinquencies trended at the major players:

Bank Delinquency Rate October Delinquency Rate November
JPMorgan Chase (JPM 1.94%) 0.73% 0.73%
Bank of America (BAC 2.06%) 0.98% 1.02%
Citigroup (C 3.06%) 0.90% 0.98%
American Express (AXP 0.85%) 0.90% 0.90%
Discover Financial Services (DFS 1.06%) 2.23% 2.36%
Capital One (COF 3.04%) 3.17% 3.32%
Synchrony Financial (SYF 1.40%) 3.40% 3.60%

Data source: Regulatory filings.

Delinquencies only ticked up modestly in November -- nothing to really be concerned about. Interestingly, banks with higher-quality borrowers like JPMorgan Chase and American Express really saw no change at all, while companies like Capital One and Synchrony with more borrowers that have lower FICO scores saw higher delinquencies. This is consistent with what we've been hearing from bank executives about credit normalizing faster for this population of borrowers. Now, let's take a look at net charge-offs.


Annualized Net
Charge-Off Rate October

Annualized Net
Charge-Off Rate November
JPMorgan Chase 1.19% 1.31%
Bank of America 1.38% 1.33%
Citigroup 1.32% 1.33%
American Express 0.90% 1%
Discover Financial Services 2.10% 2.46%
Capital One 2.93% 3.14%
Synchrony Financial 3.40% 3.60%

Again the story here is pretty consistent with delinquencies, where the companies with more borrowers lower on the credit spectrum saw charge-offs accelerate. But losses and delinquencies are still better now than pre-pandemic, and ultimately, I would expect charge-offs to still end 2022 solidly below pre-pandemic levels.

US Banks Net Charge-offs Chart

US Banks Net Charge-offs data by YCharts

The wait continues

November data continued to leave us in a holding pattern. Most investors certainly expect the consumer to continue to weaken and for credit to normalize to pre-pandemic levels, but with the labor market still strong in November, it makes a certain amount of sense that we haven't seen the normalization just yet.

The question on everyone's mind is, how quickly will things revert back to normal after the Federal Reserve's aggressive interest rate hikes this year, and will those rate hikes push the economy into a recession?

The answer is hard to know, but it will be key for investors to continue to monitor the consumer because the health of the consumer is vital to the health of the economy and the market.