The Colorado Futures Center recently released the ColoradoCast for the third quarter of 2023, which shows the state’s economy continuing to grow modestly through the early part of 2024. The model continues to show the Colorado economy averting recession, sustaining a year-over-year annual rate growth of 1-2%. Of late, the ColoradoCast has proven to slightly underperform actuals, suggesting that this growth forecast is conservative.
However, weaknesses in the consumer, both locally and nationally, are beginning to reemerge, and the requirement to begin repayment of student loan debt in the fourth quarter of 2023 will place an additional burden on household budgets. Given the importance of the consumer for sustaining economic growth, Colorado Futures has introduced a new Consumer Spotlight feature to the ColoradoCast. This shows 2023 year-to-date retail sales slowing to below medium-term trend in Colorado and slight increases in credit card delinquencies nationally.
Colorado retail sales slowing
With pandemic-era support in place, Colorado experienced double-digit increases in retail sales. In 2023, that slowed to two to three percent. Some of the decline is explained by the outsized base of which the increases are calculated, a base further elevated by inflation in 2022. Nevertheless, the annual increases in retail sales are now below the mid-term and pre-pandemic averages. Continued slowing in the consumer sector could weigh on state economic performance as 2024 unfolds.
Consumers nationwide are facing headwinds. The pandemic-era support has worked its way through household budgets and as a result, household balance sheets are losing some strength. Credit card delinquencies, after falling dramatically in the wake of the Great Recession and largely maintaining during the pandemic due to the support to households, have begun to turn upwards again. While they remain modestly below historical levels, slowly delinquencies are inching back toward pre-Great Recession levels.
Student loan payments resume
Adding to the headwinds, the three-year pause in student loan repayment and interest accrual came to an end in August. This is happening at a time when student loan debt now represents just over 9 percent of all household debt nationally, a share that has tripled since the early 2000s. Student loan debt as a share of all household debt Source: NY Federal Reserve Bank, Quarterly Report on Household Debt and Credit
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