Bill Gross is concerned about delinquent car loan payments: Is a recession still coming? | 11/11/23

• Auto loan delinquencies are at a record level since the 1990s
• Bill Gross believes that payment delinquencies are an indicator of poor consumer data
• Gross and Ackman still expect a recession in the United States

Auto loan delinquency rates are at record levels

As Forbes recently reported, car loan delinquencies in the United States are now at a record high since the 1990s. The percentage of subprime borrowers — borrowers with a credit score below 640 points — who were at least 60 days late on their car payments rose to 6.11 percent in September. Three months ago, the percentage was only 5.01 percent. For prime borrowers with credit scores of 680 or higher, the delinquency rate rose slightly to 0.27 percent from 0.25 percent three months ago. Forbes said defaults increased as the cost of living rose. The Fed’s previous interest rate hikes, which pushed auto loan interest rates to a four-year high, are also responsible.

In addition, there are also high car prices, Fox Business reported. While prices would have started to fall toward the end of 2022, the average cost of a new car would still be near an all-time high of about $48,000. Continued strikes by the United Auto Workers also have the potential to raise prices even further. For many Americans, rising interest rates and rising car prices mean their monthly payments will be more than $1,000.

Bill Gross, co-founder of Pimco: Points to weak consumer data

In an interview with CNBC, Bill Gross, co-founder of PIMCO, said the rise in delinquencies indicates weak consumer data. He actually expressed this assumption shortly ago on the SMS platform The fourth quarter”.

The carnage at regional banks and the recent rise in car payment delinquencies to long-term historical highs point to a significant slowdown in the US economy.
Recession in the fourth quarter.
The best investments are equity shares (CPRI and SGEN. VMW long shot). I’m seriously considering regional banks again. 1/2

– Bill Gross (@real_bill_gross) October 23, 2023

In the CNBC interview, Gross became more specific. Auto loan delinquency indicates that consumers are falling behind in their ability to repay. “And of course the US economy is 70 percent dependent on consumer spending. This is a difficult situation. Powell talked about the pros and cons, and we will see. But I think the economic growth that is happening at the Federal Reserve Bank in Atlanta has decreased. By about 1.5 percent, from “It is likely that it will now reach zero or perhaps a little lower in December.”

Recession in the last quarter

The overall has been bearish on the US economy for some time now. His pessimistic stance is also based on the significant challenges faced by several regional US banks earlier this year, which led to several bank failures. Gross is not alone in his predictions of recession. Recently, Bill Ackman also exited his investment positions that relied on the decline in long-term US bond prices. He justified this with concerns about the impending recession in the United States. In a post on X, he wrote: “The economy is slowing faster than the latest data indicates.” In another post, he warned that there was “too much risk in the world to continue betting on a bond decline.”

Finanzen.ch editorial team