This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we’re watching
What we’re reading
Economic data releases and earnings
Take your pick. Social feeds are filled with #RecessionIndicators, ranging from the delightfully absurd to the quietly astute.
But the urge to find out where the economy is heading before definitive findings is a powerful one. Retail sales, commentary from big box companies, and debt loads all contribute to an understanding of the health of the US consumer. New financial products can also offer fresh insight.
Klarna (KLAR.PVT), the buy now, pay later lender, reported this week that consumer credit losses rose 17% for the first quarter compared to the same period last year. And that even as revenue rose to over $700 million, net losses doubled to $99 million.
The Swedish company, which allows consumers to buy big-ticket items or make routine purchases on interest-free payment plans, recently announced a partnership with DoorDash — the genesis of internet memes remixing the subprime mortgage crisis with late night Taco Bell.
But Klarna’s quarterly data arrived alongside other potentially troubling findings about buy now, pay later (BNPL) borrowers. 41% of BNPL users said they paid late on one of their loans in the past year, according to a new survey published by the credit platform Lending Tree. That figure is up from 34% a year ago. The survey also found that a quarter of users say they’ve used the loans to buy groceries, a 14% increase from last year.
Shares of Affirm, a competing BNPL company, sank after reporting a weaker outlook earlier this month but have since rebounded as the lender attempts to take share from credit card brands. And in April Klarna postponed its plans for an initial public offering amid the tariff uncertainty that has gripped Wall Street, according to reports.
Klarna has said that the increase in consumer credit losses doesn’t say much about the US consumer. Instead, the company has pointed to another metric: credit losses as a share of the total sum of its consumer loans. Makes sense. That figure came in at 0.54%, up from 0.51% during the same period last year, a slight increase but still low overall. The company has also claimed the short duration of its products — 83% of its loan booking refreshes within three months — gives it the ability to “respond rapidly to evolving market conditions.”
But another key point here is that the constellation of data we all look at to take the economy’s temperature is getting broader as financial instruments and consumer options evolve in tandem.
If a recession does come, rather than the YOLO chaos of buy now, pay never, we can imagine that underwriting decisions would become more discerning. In the meantime, alongside credit card delinquency, BNPL has become a novel gauge to track.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.
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