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Personal finance weekly news roundup August 12, 2023

Weekly Personal Finance News Recap - AUGUST 12, 2023

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Credit Sesame’s personal finance weekly news roundup August 12, 2023. Stories, news, politics and events impacting the personal finance sector during the last week.

  1. Inflation remained calm in July 2023
  2. Producer price increases accelerate
  3. JP Morgan upgrades forecast for US economy
  4. Credit agency downgrades several US banks
  5. Regulators fine financial firms for using messaging apps
  6. Community banks struggle with industry headwinds
  7. Bankers see tighter credit standards and less loan demand
  8. Mortgage availability sinks to 10-year low
  9. Mortgage rates edge closer to 7%

1. Inflation remained calm in July 2023

FoTheonsumer Price Index (CPI) rose by just 0.2% for the second consecutive month. The inflation rate for the past 12 months was 3.2%. Significantly, the core inflation rate, which measures inflation without the volatile food and energy sectors, was in line with the overall inflation rate for the second month iCore inflation is considered an indication of how widely inflation trends are reflected across different sectors of the economy. Among major components of the CPI, fuel oil showed the biggest increase in July, with a 3.0% rise. Used cars and trucks experienced the greatest decline, with prices falling by 1.3% for the month. See news release at BLS.gov.

2. Producer price increases accelerate

While the Consumer Price Index seems to have leveled off recently, the Producer Price Index (PPI) increased fastest since January. The PPI measures the prices that retailers pay for goods and services. This index increased by 0.3% in July. Food and services were the biggest causes of the increase, wach rising by 0.5% for the month. While a continued rise in the PPI would put pressure on retailers to raise prices further, over the past 12 months the PPI has increased by only 0.8%. See news release at BLS.gov.

3. JP Morgan upgrades forecast for US economy

After previously predicting a recession, economists at JP Morgan Chase now say that the current economic expansion will continue for the remainder of this year and throughout 2024. However, while forecasting continued growth, the JP Morgan economists caution that it will be subpar. The improved outlook reflects a growing consensus that the US economy will achieve a soft landing. That means the economy would slow enough to cool inflation without lapsing into a recession. See article at GulfNews.com.

4. Credit agency downgrades several US banks

Moody’s, an institutional credit rating agency, has downgraded its ratings of 10 US banks. These are small-to-medium-sized banks, but Moody’s also warned of potential downgrades at six larger financial institutions. The downgrade is because Moody’s sees the banks’ profitability coming under pressure. Negative factors include higher interest rates, lower loan demand and rising credit standards. Moody’s also cited the lingering possibility of a recession in 2024 and a heightened risk to commercial real estate loan portfolios. The performance of commercial real estate loans is coming under question due to reduced demand for office space due to remote work. See article at Reuters.com.

5. Regulators fine financial firms for using messaging apps

The Securities and Exchange Commission (SEC) has fined 11 financial firms for conducting business over messaging apps. In addition, the Commodity Futures Trading Commission (CFTC) fined four banks for failure to maintain adequate records. At issue is that communications on messaging apps are not preserved according to regulatory record-keeping guidelines. Combined, the SEC and CFTC fines total $549 million. Wells Fargo bank was hit the hardest, racking up $200 million in fines. See article at CNBC.com.

6. Community banks struggle with industry headwinds

S&P Global Market Intelligence reported that banks with under $10 billion in assets performed poorly on various metrics over the past year. The poor results were due to rising interest rates plus customer unease caused by high-profile banking failures early in the year. Returns on assets, efficiency ratios and deposit growth rates were alwn over the past year. Reflecting the poor financial performance, a survey of community banker sentiment found extreme pessimism. An index measuring that sentiment hit a record low in the second quarter of 2023. One analyst describes the sentiment of community bankers as “worse than dismal.” See report at SPGlobal.com.

7. Bankers see tighter credit standards and less loan demand

A Federal Reserve survey of loan officers points to reduced loan activity in the months ahead. The reduction comes from both the supply side and the demand side. Loan officers are tightening credit standards for residential home loans and all other types of consumer loans. Demand for residential and auto loans has dropped, while credit card demand has remained unchanged. Loan officers cited a variety of conditions as leading to tighter credit standards. These include economic uncertainty, deteriorating collateral values and concern about the credit quality of loans. Tighter standards mean it will be more difficult and expensive for consumers to get credit, especially for those with lower credit scores. See article at TopClassActions.com.

8. Mortgage availability sinks to 10-year low

The Mortgage Bankers Association’s mortgage credit availability index fell to its lowest since 2013. This continues a trend of mortgage approval standards tightening over the past three years. Mortgage availability diminished across all categories of home loans in July, but was particularly acute for jumbo loans. See article at CNBC.com.

9. Mortgage rates edge closer to 7%

30-year mortgage rates climbed for the third week in a row. They reached 6.96%, tying their highest level so far in 2023. 15-year rates also rose for a third consecutive week to reach 6.34%. See rate update at FreddieMac.com.

Weekly News Headlines from Credit Sesame

Richard Barrington
Financial analyst for Credit Sesame, Richard Barrington earned his Chartered Financial Analyst designation and worked for over thirty years in the financial industry. He graduated from St. John Fisher College and joined Manning & Napier Advisors. He worked his way up to become head of marketing and client service, an owner of the firm and a member of its governing executive committee. He left the investment business in 2006 to become a financial analyst and commentator with a focus on the impact of the economy on personal finances. In that role he has appeared on Fox Business News and NPR, and has been quoted by the Wall Street Journal, the New York Times, USA Today, CNBC and many other publications.

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