American consumers may be becoming more concerned about their debt.
This came according to a report released on Tuesday by the Federal Reserve Bank of New York, which looked at Americans' recent spending habits and how much they plan to spend in the near future.
The survey asks individuals how they would budget for an unexpected 10% increase in their income.
An average of 38% of households said they would use this sudden wage increase to pay off debt, rather than spending or saving money.
That's a jump of about 5 percentage points from last year and the highest percentage of respondents who said they would set money aside for debt payments since 2016.
Only 16% said they would spend or donate the money, the lowest percentage since the Fed began tracking the data nine years ago.
American consumer debt has accumulated significantly over the past year, with consumer credit card debt levels reaching record levels in recent months. The widespread use of buy-now-pay-later services during the holidays has heightened concerns that so-called phantom debt could be denting Americans' wallets without documenting it on their credit reports.
Total consumer credit, a measure of how much money people have borrowed, exceeded $5 trillion for the first time in November, a trend that Sheila Burr, former head of the Federal Deposit Insurance Corporation, called “not good.”
What did the data show?
The Federal Reserve Bank of New York's report showed that household spending continued to moderate at the end of 2023.
“The survey shows a continuation of the recent downward trend in monthly household spending growth, although spending growth remains well above pre-pandemic levels,” the report said.
The report showed that household spending growth expectations for next year reached the lowest level since December 2020.
Survey respondents said they were less likely to make large purchases such as household appliances, furniture or home repairs in the next four months. However, consumers indicated that they are more likely to purchase a home in the next four months than they were in August.
