In today's fast changing economic environment, staying informed about macroeconomic trends is essential for businesses across various sectors. Especially for the telco and utility sectors.  

The current economic landscape provides valuable insights into credit risk for industry stakeholders. In this article, we'll explore the macroeconomic trends impacting the telco and utility sectors. We will also highlight the key challenges and opportunities on the horizon.

Understanding Economic Dynamics

Economists suggest we're edging closer to a soft landing, but challenges persist for consumers.¹

Here are the key drivers impacting the current economic landscape:

• Financial Stress: Despite signs of economic stability, a notable share of households remain under financial strain, particularly those burdened with student debt payments.

• Market Dynamics: While stocks are likely to perform well, potential inflation surprises could impact all sectors.

• Labor Market: While unemployment rates remain low, labor shortages have eased compared to previous years.

• Global Supply Chains: Supply chains are normalizing, with shifts away from China towards countries like Mexico, India, and Vietnam.²

Affordability

Americans are still feeling the impact of increased prices for goods and services. They are especially feeling it in housing costs and new and used automobile prices. The affordability of goods and services is also compounded with increasing consumer debt load:

• 49% of credit cardholders are carrying a balance 

• 58% carried debt for at least a year

• Consumers are not splurging, but instead paying for unexpected or emergency expenses.

A Forbes survey indicates 4 in 10 Americans are living paycheck to paycheck. 77% indicating no emergency funds to cover a month of expenses.³

Consumer confidence for February registered its first decline since November, reflecting persistent uncertainty about the US economy and the upcoming presidential election.⁴

Credit trends

We are still enjoying a very healthy credit climate. Most consumers are experiencing comfortable personal savings. Despite minor fluctuations, credit scores remain relatively stable. Challenges include delinquency rates, increasing personal loan balances, and high interest rates.

What could turn the economy upside-down?

Any or all of the following have the potential to shift the economic landscape:

• Election Year Dynamics: Political events and policy changes could influence economic trajectories.

• Supply Chain Risks: Shipping disruptions and geopolitical tensions may impact global trade and prices.

• Commercial Real Estate: Challenges in the commercial real estate sector could reverberate through financial markets.

Americans have felt the impact of:

• inflation, 

• rising interest rates,

• and the challenges that come with the resumption of student loan payments.⁵

The good news is many Americans remain in strong fiscal shape in the face of these challenges. Telco and utility customers are still showing resilience in meeting financial obligations. Delinquency in the telco and utility sectors remain at all-time lows. But, fiscal challenges abound and will continue to impact some Americans on the lower-end of the economic spectrum. Telco and utility payments remain at the top of Americans' monthly choices in which payments to make first. But, Americans have built up credit obligations at a rapid rate. Utilization is surpassing pre-pandemic levels.⁶ Therefore, credit and score monitoring along with customer outreach are best practices. Knowing what your customer challenges are and how you can help is critical to success in building a trusted relationship with your customer.

In the face of uncertainties, resilience and strategic foresight remain our greatest assets. As telco and utility industry decision-makers, it's crucial to stay adaptable in navigating the ever-changing economic landscape. By understanding the nuances of consumer behavior, credit risk, and economic trends, companies can proactively respond to challenges and capitalize on emerging opportunities.

Through data insights and informed decision-making, the industry can forge a path towards sustainable growth. Learn more. 

1. https://www.imf.org/en/Blogs/Articles/2024/01/30/global-economy-approaches-soft-landing-but-risks-remain

2. https://economictimes.indiatimes.com/small-biz/trade/exports/insights/global-supply-chain-relocation-chinas-loss-is-india-vietnams-gain/articleshow/100580950.cms?from=mdr

3.  Bankrate Survey via Yahoo Finance: https://finance.yahoo.com/news/moving-wrong-direction-more-more-110000187.html https://www.forbes.com/advisor/credit-cards/survey-living-paycheck-to-paycheck/

4. University of Michigan Confidence Survey: Dec’23: https://data.sca.isr.umich.edu/fetchdoc.php?docid=74601

5. https://www.cnn.com/2023/10/11/economy/student-loan-budgets-economic-impact-spending/index.html

6. https://www.gao.gov/blog/american-credit-card-debt-hits-new-record-whats-changed-post-pandemic#:~:text=While%20consumers'%20credit%20card%20debt,used%20in%20the%20United%20States.