Americans Pile on Debt as Chinese Pinch Pennies: Why Americans Borrowing, Chinese Budgeting
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U.S. Sees Record Increase in Credit Balances Amid High Expectations for Economic Recovery
China, Burdened by Economic Slump, Focuses on Low-cost Brands Consumption
Starbucks Loses Top Spot to Low-cost Brand Luckin in China
The consumption trends of the two economic superpowers, the U.S. and China, are starkly different. Americans, buoyed by expectations of a soft landing, continue to consume even while incurring debt, while the Chinese, anxious about an economic slump, are fueling a price war among consumer goods brands by tightening their belts.
According to Bloomberg, on the 8th (local time), the U.S. Federal Reserve (Fed) announced that total debt increased by $23.8 billion in November last year. This figure far exceeds the $5.8 billion recorded in October and the previous record high of $8.6 billion.
The credit balance, including credit cards, also increased by $19.1 billion in November, marking the highest level since March 2022. Loans for vehicle purchases and school tuition also increased during this period.
Additionally, according to separate figures compiled by the Federal Reserve Bank of New York, the outstanding revolving credit balance in the third quarter of last year increased by more than $150 billion compared to the previous year. This marks the largest increase since 1999.
Consumer loans in November increased at the largest rate of the year as the holiday shopping season kicked into high gear and credit card balances surged. Steady employment, wage increases, and savings growth have led American consumers to continue spending and take on more credit card debt.
On the other hand, China is waging a price war among domestic and foreign brands as consumers tighten their belts due to slowing growth. Alibaba’s grocery chain, Freshippo, announced price cuts for over 5,000 items last October. German supermarket chain Aldi, which has been operating as a premium chain in China for years, declared itself a low-budget supermarket last year and unveiled a new slogan, “Good quality and low prices.”
Starbucks, which once held more than half of the market sales in China, has ceded the top spot to Luckin, which focuses on selling $1 coffee.
Jason Yu, director at consumer behavior analysis firm Kantar Worldpanel, remarked that in the previous year, owing to the economic downturn and diminishing consumer confidence, retail brands extensively employed low-cost strategies. He noted that the deflationary trend appears to have no immediate end and anticipates it will persist throughout the current year.
By. Dae Young Ko
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