Consumer stability take a hit in third quarter 2025

Leslie Adames, director of Estudios Técnicos Inc.’s Economic Analysis and Policy Division (sincomillas.com)

By THE STAR STAFF

The financial stability of consumers in Puerto Rico took a hit during the third quarter of 2025, as revealed by the latest Consumer Financial Fragility Index (CFFI) from Estudios Técnicos Inc. (ETI).

After experiencing a mix of trends in previous quarters, the index now shows a consistent downward path, indicating that households are grappling with a more challenging financial landscape.

The CFFI climbed to 44%, up from a low of 33% earlier this year. The increase marks the second consecutive quarter of growth and brings the index back to levels seen before the mid-2024 correction. Leslie Adames, director of ETI’s Economic Analysis and Policy Division, noted that the uptick in the index is driven by rising loan delinquency, a spike in personal bankruptcies, and stagnant real incomes. While consumers are still categorized as moderately fragile, the trend suggests they are edging closer to high fragility.

Consumer loan delinquency has steadily risen, going from 2.70% in the first quarter of 2025 to 3.04% in the second quarter, and reaching 3.27% in the third quarter. Similarly, personal bankruptcy cases increased from 904 in the first quarter to 956 in the second, and 962 in the third quarter. Other financial indicators support this downward trend: credit card delinquency rose from 2.15% to 2.40% between the second and third quarters, while auto loan delinquency increased from 3.23% to 3.47%, according to data from the Federal Deposit Insurance Corporation. Those shifts suggest heightened pressure on consumers’ ability to repay their debts and emerging credit risks.

The CFFI is built on five key factors: consumer loan delinquency, mortgage delinquency, the unemployment rate, personal bankruptcy rates, and inflation-adjusted annual income. Together, those variables provide a view of consumer financial health and the ability of consumers to handle economic shocks. The index categorizes risk into four levels: low fragility (0–25), moderate fragility (26–50), high fragility (51–75) and extreme fragility (76–100).

Beyond the immediate findings, there are structural issues that worsen the outlook. Consumer net worth, a marker of long-term financial health, dropped from 31.4% in 2019 to 14% in 2024. This decline mirrors a decrease in the excess liquidity saved in recent years, alongside a rise in overall indebtedness. Additionally, debt as a percentage of disposable personal income increased to 44%, compared to 39.6% in 2022.

Adames cautions that the future may pose even bigger challenges. The full impact of federal tariffs on prices has yet to be felt locally, although some imported products are already seeing price increases.

“If this trend continues, we’ll face greater strain on household budgets, which could further restrict consumers’ ability to meet their financial obligations,” he remarked.

Although the unemployment rate is currently at historically low levels, job creation has slowed, and real income slightly contracted in the last quarter after five quarters of growth. That adjustment, combined with rising debt levels and the potential for tighter credit requirements, may hinder consumer spending -- a crucial factor for short-term economic growth.

The recent trends in the CFFI, along with growing inflationary pressures and increased credit stress, indicate that consumer financial fragility could significantly influence Puerto Rico’s economic landscape in the months ahead.