Credit Card Delinquencies Hit a New High

January 6, 2004

WASHINGTON (Reuters) - The weak U.S. job market helped nudge credit card delinquencies to a record high in the third quarter of 2003, a banking trade association said in a report released on Tuesday.

Credit card delinquencies rose to a seasonally adjusted 4.09 percent of all accounts in the period from 4.04 percent in the second quarter, the American Bankers Association said. "The job market has been flying against strong headwinds, lengthening the time between jobs and intensifying financial stress," ABA Chief Economist James Chessen said.

The average length of unemployment surpassed 20 weeks during the third quarter, the Labor Department said.

The U.S. economy has shed 2 million jobs since the start of 2001 and businesses have not yet begun to hire many workers even though conditions have improved and profits picked up. Recent economic data has reinforced a picture of the U.S. economy shifting into high gear.

U.S. factory activity hit a 20-year high in December, the Institute for Supply Management said last week, while its job index for the battered manufacturing sector indicated a second month of gains after 40 months of losses.

U.S. gross domestic product -- which soared 8.2 percent in the third quarter -- may signal a brighter picture for cashed-strapped consumers, the ABA's Chessen said.

"The strong third quarter GDP may signal a shift of the winds and a more positive outlook for jobs and financial health," he said.

Delinquency rates for direct auto loans and home equity loans also rose, the ABA said.

Other types of consumer loan delinquencies eased during the third quarter, the bankers' group said. A composite of installment loans 30 days or more past due dropped to 2.14 percent of all accounts from 2.18 percent.

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