U.S. household debt hit a new record as more Americans pinch pennies to pay their credit card and auto bills on time.

According to the New York Fed’s data, household debt grew by $212 billion to $17.5 trillion last quarter. Notably, high-interest credit cards contributed $50 billion, while auto loans added $12 billion.

Economists often view rising consumer debt as a positive sign that underscores higher consumption and economic growth. Not this time.

The Fed noted that “serious credit card delinquencies increased across all age groups, notably with younger borrowers surpassing pre-pandemic levels.”

In fact, roughly 8.5% of credit card balances and 7.7% of auto loans were delinquent—meaning payments were at least 30 days past due.

Credit card balances in “serious delinquency,” or at least 90 days past due, rose to 6.4%. That’s 59% higher than the previous year.

“This signals increased financial stress, especially among younger and lower-income households,” according to Wilbert van der Klaauw, an economic research adviser at the New York Fed.

The data came mere weeks after the Bureau of Economic Analysis reported another unexpected surge in economic growth in the fourth quarter, largely on the back of consumer spending.

As Creditnews reported at the time, consumer debt likely played a major role in sustaining economic growth.

While economists often quip that it’s unwise to bet against the American consumer, there’s only so much heavy lifting Americans can do moving forward.

As debt levels continue to grow, even a mild economic downturn could have serious consequences.

Consumer debt isn’t a problem—until it is

While GDP numbers may suggest the economy is on the right trajectory, other data paints a mixed picture.

Tech companies laid off tens of thousands of workers last month, manufacturing is mired in weakness, and a majority of low-income Americans are considered “rent-burdened,” meaning more than one-third of their income goes toward housing costs.

Americans are not only living paycheck to paycheck—they’re taking on more debt just to make ends meet. According to a third-quarter survey by Clever Real Estate, 23% of Americans acquire more debt every month just to pay the bills.

While the U.S. economy added 353,000 workers last month, economists have spotted “oddities” in the data. “Full-time employment has plunged by nearly 1.4 million people over [the] past three months,” according to Liz Ann Sonders, chief investment strategist at Charles Schwab.

Economists have downgraded the odds of a recession in the near future, but several institutions expect the U.S. to enter a much weaker period of growth as consumer spending begins to taper.

According to the IMF, U.S. GDP is forecast to grow a lousy 2.1% this year—and slow even further to 1.5% in 2025.

That could spell trouble for the credit-fueled economy.

“What happens if the economy slows and unemployment quickly rises? Delinquencies could surge, in turn leading to a self-reinforcing credit crunch,” wrote Joseph LaVorgna, chief economist at SMBC Nikko Securities. “In other words, a mild downturn could turn into a deep one.”

Personal savings growth continues to slow

Americans are spending more while saving less, which is a bad combination if the economy begins to sputter.

U.S. personal savings as a percentage of disposable income fell to 3.7% in December, the lowest in a year. The long-term average is more than 8%, according to data from YCharts.

Meanwhile, U.S. inflation ticked up to 3.4% in December. Excluding food and energy, inflation was up 3.9% from a year ago.

Although households built up excess savings during the pandemic, the windfall has already been exhausted, according to the Fed. Combined with persistent inflation, households aren’t able to save enough for a rainy day.

If this continues, consumer spending could decelerate, economists say.

“People have drawn down their savings and have less capital” to spend, Gregory Daco, chief economist of EY-Parthenon, told USA Today.

“We are always unwilling to bet against the U.S. consumer, but we’re struggling here to see a plausible path to avoid a meaningful slowdown in their spending,” Ian Shepherdson, chief economist of Pantheon Macroeconomics, wrote in a note to clients.