Pressure on lower-income US households raises delinquency risks, Morningstar DBRS says
SPY•Morningstar DBRS said elevated inflation and higher gasoline prices are pressuring lower-income US households, raising the risk of delinquencies and charge-offs across most consumer asset classes. Gasoline averaged $4.50 per gallon on October 5, up 46% since the Iran war began in February.
1. Household budgets strained
Morningstar DBRS said lower-income US households face further budget pressure as inflation stays elevated and the Iran war pushes up gasoline prices. The agency said the average gasoline price rose 46% to $4.50 per gallon as of October 5, compared with an average of $3.64 over the past four years and $3.45 in the 12 months before the war.
2. Credit risks and lenders
The agency said higher costs increase the risk of missed payments among non-prime borrowers, who typically have lower credit scores and less financial cushion. Lenders focused on non-prime consumers could face higher provisioning costs, weighing on earnings and potentially straining credit ratings. US lender results this month showed credit quality had been stable so far, with executives citing resilience across consumer income groups and in the broader economy.
