Credit Sesame’s weekly news roundup November 12, 2022. Stories, news, politics and events impacting the personal finance sector during the past week.
- One-year inflation eased in October
- Fed report indicates consumer debt no threat to stability
- Elon Musk shakes up Twitter
- Debt continues to climb despite rising interest rates
- Cryptocurrencies decline on exchange concerns
- Most people with debt say it impedes financial goals
- Stock market rallies following favorable inflation news
- Mortgage rates back up to 20-year high
1. One-year inflation eased in October
The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose by 7.7% over the twelve months ending October 31, 2022. While still a high rate of inflation, that marks an improvement over the 8.2% 1-year inflation rate through September 30. The 7.7% increase was the smallest 1-year increase in CPI since the end of January. Inflation has now moderated for the last four months after rising by 1% or more in both June and July. So-called core inflation, which excludes the volatile food and energy sectors, was an even more moderate 6.3% over the past 12 months. See full release at BLS.gov.
2. Fed report indicates consumer debt no threat to stability
A semi-annual Federal Reserve report on the stability of the U.S. financial system acknowledged that household debt rose in the first half of 2022, but views it as still being at a reasonable level. The report noted that the ratio of household debt relative to GDP is at moderate levels. That means that the amount of debt is not out of proportion with the size of the economy overall. What’s also significant is that household debt is most concentrated among prime borrowers, who are in the best position to meet their debt obligations. See full report at FederalReserve.gov.
3. Elon Musk shakes up Twitter
For better or worse, Elon Musk lost no time in leaving his mark on Twitter after acquiring a controlling share of the company. One of his first moves was to lay off roughly half the workforce. In response, employees have filed a class action lawsuit against the company. Meanwhile some advertisers have pulled their business from the platform. Musk acknowledged that advertiser reaction was causing a “massive drop in revenue,” though he placed the blame on activists rather than on his own decisions. See full story at Reuters.com.
4. Debt continues to climb despite rising interest rates
Newly released Federal Reserve data shows that rising interest rates have not deterred consumers from continuing to take on more debt. Non-mortgage consumer debt increased by $25 billion in September, and by a total of $78.9 billion in the third quarter. That represented a 6.8% annual rate of debt growth for the quarter, which was slower than the pace of debt growth in the first two quarters of the year. Credit card debt grew at a 12.9% annual rate during the quarter, compared to 4.9% for loan debt. Credit card debt typically carries a higher interest rate than loan debt. See full release at FederalReserve.gov.
5. Cryptocurrencies slide on exchange concerns
Cryptocurrencies dropped sharply as investors cashed out amid speculation about financial problems at FTX. The proprietary crypto token of FTX slid by 15% while Bitcoin prices lost 6% in a matter of hours. FTX is a major crypto trading exchange. Over the weekend, the head of rival exchange Binance said they would be liquidating their holdings of the FTX tokens due to “recent revelations” about FTX. The failure to specify what those revelations were added fuel to rumors about the solvency of the FTX exchange. Binance later offered to buy out FTX in what was seen as a bailout due to liquidity concerns for FTX, but that deal subsequently fell through. See article at Reuters.com.
6. Most people with debt say it impedes financial goals
A New York Life survey found that most people with debt say that it is stopping them from reaching their financial goals. Nearly two-thirds of all responders said they are currently in debt. Of those, 58% said debt was preventing them from reaching their financial goals. 56% of people with debt said they are nervous about being able to pay their debts in retirement. Credit card debt was the most common form of debt owed by people in the survey. See article at BankingJournal.ABA.com.
7. Stock market rallies following favorable inflation news
U.S. stocks surged on news of an unexpectedly moderate inflation report. The Dow Jones Industrial Average rose by 3.7%, the S&P 500 rose by 5.5% and the Nasdaq Composite rose by 7.4% Each was the largest one-day rise in over two years. Stock investors cheer milder inflation for two primary reasons. First, lower inflation raises the present value of future stock earnings. Second, milder inflation might slow or ultimately reverse the Fed’s interest rate hikes, which threaten to slow the economy. See article at Yahoo.com.
8. Mortgage rates back to 20-year high
After a brief dip below 7%, 30-year mortgage rates bounced back up to 7.08% last week. That ties the highest level they’ve reached in the past 20 years. Meanwhile, adjustable rate mortgages rose above 6% for the first time in over a decade. See full mortgage update at FreddieMac.com.