Delinquency Download: Health of the Consumer Through a Financials LensFebruary 23, 2024Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.Sarah Wolfe – US EconomistSarah.Wolfe@morganstanley.com; +1 212 761-0857Heather Berger – ABS StrategistHeather.Berger@morganstanley.com; +1 212 761-2296Jeff Adelson – Lead Analyst, US Consumer FinanceJeff.Adelson@morganstanley.com; +1 212 761-1761James Faucette – Lead Analyst, US Fintech & PaymentsJames.Faucette@morganstanley.com; +1 212 296-5771Wendy Yan – Financials and REITs Sector SpecialistWenxin.Yan@morganstanley.com; +1 212 761-2836Morgan Stanley ResearchMorgan Stanley & Co LLCFebruary 23, 2024 02:00 PM GMTMORGAN STANLEY RESEARCH2FEBRUARY 23, 2024Sarah WolfeUS EconomistMORGAN STANLEY RESEARCH3FEBRUARY 23, 2024Income drives consumptionA resilient labor market has fueled resilient consumer spending, but real income growth slows through 2025. In 2024 and 2025, real income growth decelerates to 3.0% 4Q/4Q and 1.6% 4Q/4Q (4.2% in 2023), as labor demand and supply come into better balance, cooling job growth and wage pressures.Real labor compensation slowingReal consumer spending runs below longer-run trendSource: Bureau of Economic Analysis, Morgan Stanley Research forecasts2012-2019 Trend: 3.0%30%1%2%3%4%5%1Q232Q233Q234Q23 1Q24E 2Q24E 3Q24E 4Q24E 1Q25E 2Q25E 3Q25E 4Q25EQuarterly Real Labor Compensation, %3.80.83.12.82.01.81.71.61.51.41.21.22012-2019 Trend: 2.5%0%1%2%3%4%1Q23 2Q23 3Q23 4Q23 1Q24E 2Q24E 3Q24E 4Q24E 1Q25E 2Q25E 3Q25E 4Q25EQuarterly Real PCE, %MORGAN STANLEY RESEARCH4FEBRUARY 23, 2024Banking tightening lending standardsBanks continue to tighten lending standards across consumer loan products, but the extent of tightening across autos, cards, and other consumer loans was less significant than the prior quarter. Similarly, demand for these loan types is still decreasing, but the incremental change in demand was not as significant as last quarter. Source: Federal Reserve Board, Morgan Stanley ResearchLending standards remain tight, but incrementally less so……and loan demand is weak but not falling further-50%-40%-30%-20%-10%0%10%20%30%40%50%2Q213Q214Q211Q222Q223Q224Q221Q232Q233Q234Q231Q24Net Respondents Tightening Lending StandardsCredit CardsAuto LoansOther Consumer Loans-50%-40%-30%-20%-10%0%10%20%30%40%3Q214Q211Q222Q223Q224Q221Q232Q233Q234Q231Q24Net Change in DemandCredit CardsAuto LoansOther Consumer LoansMore DemandLess DemandMORGAN STANLEY RESEARCH5FEBRUARY 23, 2024Resulting in slower loan growthTighter lending standards are constraining acc...
