Credit Sesame’s personal finance news roundup April 13, 2024. Stories, news, politics and events impacting personal finance during the past week.
- Consumer survey shows gathering gloom
- Inflation continues to run hot
- Producer prices indicate there may be room for inflation to ease
- Study shows how housing affects how economies respond to higher interest rates
- Debt growth slows but becomes more toxic
- Credit card delinquency rates reach new high.
- Mortgage rates climb
Consumer survey shows gathering gloom
The latest Survey of Consumer Expectations from the Federal Reserve Bank of New York showed growing pessimism about certain aspects of the economy. The perceived chance of losing one’s job in the next 12 months rose to its highest since September 2020. Meanwhile, jobless people’s perceived chance of finding work dropped for a third straight month, reaching its lowest level in almost three years. On average, consumers expect household spending to grow by 1.9% more than income growth. The average perceived likelihood of missing a debt payment over the next three months rose to its highest level in four years. See details at NewYorkFed.org.
Inflation continues to run hot
The Consumer Price Index rose by 0.4% in March. That’s the second consecutive monthly increase of 0.4%. If continued over an entire year, that pace would result in annual inflation of 4.9%. This would raise inflation above the 3.5% pace of the past 12 months and make it more than double the Fed’s 2% target. The core inflation rate in March matched the overall rate of 0.4%. The stock market dropped sharply after the report’s release for fear persistent inflation would keep interest rates from falling. See report at BLS.gov.
Producer prices indicate there may be room for inflation to ease
The Producer Price Index rose by just 0.2% last month. This reflects a slower pace of price increases, following a 0.4% increase in January and a 0.6% increase in February. Core inflation, which excludes the food and energy sectors, was even slower, at 0.1% in March. For the past 12 months, producer prices have been up by just 2.1%, which is pretty much in line with the Federal Reserve’s inflation target of 2.0%. The slower pace of producer price increases suggests there may be room for the pace of consumer price increases to slow. Still, for now, retailers are continuing to take advantage of persistent consumer demand. See report at BLS.gov.
Study shows how housing affects how economies respond to higher interest rates
A new analysis from the International Monetary Fund shows that housing market characteristics significantly affect how sensitive different countries are to higher interest rates. Rates have risen around the world in response to higher global inflation. However, the burden this has created varies greatly from country to country. A key factor is the prevalence of fixed-rate mortgages. For example, in the United States, fixed-rate mortgages represent well over 90% of home loans. This is second globally only to Mexico. A high proportion of fixed-rate home loans means rising rates have less impact. In that situation, relatively few existing homeowners feel the bite. As more new buyers sign on to higher-rate mortgages, the effect grows. In contrast, most mortgages have variable rates in countries like South Africa, Japan, Korea, and Spain. This means that rising rates have had a more immediate impact on their economies. See analysis at IMF.org.
Debt growth slows but becomes more toxic
The Federal Reserve reported that non-mortgage consumer debt grew at a seasonally adjusted annual pace of 3.4% in February. That continues the more moderate pace of debt growth that began in 2023, after robust growth in 2021 and 2022. However, the type of debt consumers are taking on is becoming more harmful. Revolving debt grew at 1 0.2% in February, compared to 0.9% for non-revolving debt. Revolving debt typically carries higher interest rates and is more sensitive to interest rate changes. See details at FederalReserve.gov.
Credit card delinquency rates reach new high.
According to the Federal Reserve Bank of Philadelphia, the percentage of credit card accounts that were 30 or more days overdue reached a new high in the fourth quarter of last year. While the data series only goes back to 2012 and omits the Great Recession, the rising delinquency rates represent consumers’ growing problems with debt. 3.5% of card balances were 30 days or more past due at the end of December, up 0.30% from the previous quarter. While credit scores generally have held up well despite growing debt balances and rising delinquency rates, they have been falling rapidly among people in the bottom 25% of credit scores. See article at Yahoo.com.
Mortgage rates climb
30-year mortgage rates rose by 0.06% last week to 6.88%. While 30-year rates remain in the relatively tight range of 6.61% to 6.94% that they’ve maintained so far this year, this was the second consecutive weekly increase. 15-year rates also rose last week, by 0.10%, to reach 6.16%. See rate details at FreddieMac.com.
Weekly news headlines from Credit Sesame
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