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News roundup September 16, 2023

Weekly Personal Finance News Recap - SEPTEMBER 16, 2023

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Credit Sesame’s personal finance weekly news roundup September 16, 2023. Stories, news, politics and events impacting the personal finance sector during the last week.

  1. A record share of Americans say it is harder to get credit
  2. Inflation bounces back
  3. Producer prices threaten more inflation
  4. Lawmakers grapple with insurance availability
  5. Household wealth reaches record high
  6. Average consumer spending rose 9% last year
  7. Consumer borrowing still rising
  8. August retail sales not as strong as they appear
  9. Mortgage rates resume upward course

1. A record share of Americans say it is harder to get credit

The latest Survey of Consumer Expectations from the Federal Reserve Bank of New York found that 59.8% of consumers say it is harder to get credit now than a year ago. That’s the highest percentage of people who report credit conditions have gotten more challenging since this survey question was first asked back in 2013. The percentage of respondents who said their overall financial situation was worse than a year ago rose in the latest survey, as did the percentage who said they expect it to get worse in the year ahead. See news release at NewYorkFed.org.

2. Inflation bounces back

After several months of easing, inflation showed signs of a resurgence in August. The Consumer Price Index was up by 0.6%, the highest monthly increase since June last year. That brought the year-over-year inflation figure to 3.7%, up from 3.2% last month. While this is well below the 8.9% peak in year-over-year inflation reached last June, it remains well above the Federal Reserve’s 2% target. Rising oil prices led to the rebound of inflation. The gasoline component of inflation was up by 10.6% in August alone, and the fuel oil component was up by 9.1%. Core inflation, which excludes food and energy, was up by less than the overall inflation rate for August, with a gain of 0.3%. However, it remains higher than overall inflation for the past year, at 4.3%. That’s a sign that inflation has spread to many sectors of the economy. See inflation report at BLS.gov.

3. Producer prices threaten more inflation

The Producer Price Index (PPI) rose faster than the CPI for the second consecutive month. The PPI measures prices paid by merchants and service providers. Over time, changes in these wholesale costs generally get passed on to consumers. The PPI rose by 0.7% in August, faster than the 0.6% upturn in the CPI. As with CPI, energy prices were the most significant factor in August’s PPI increase. Another troubling sign is that the cost of goods rose considerably faster than the cost of services, suggesting that little of the overall increase is finding its way into wages. See news release at BLS.gov.

4. Lawmakers grapple with insurance availability

The U.S. Senate held hearings about the growing difficulties of homeowners finding affordable insurance policies. Increasingly volatile weather has led to substantial premium hikes. In some cases, policy issuers have been forced to pull out of some areas altogether. While the problem has gotten the attention of lawmakers, they can’t agree on whether additional insurance regulation would be a solution or add to the problem. See CNBC.com.

5. Household wealth reaches record high

The Federal Reserve reported that U.S. household wealth reached a record $154.28 trillion in the second quarter of this year. That was a gain of 3.7% from the previous quarter. A rally in the stock market and a rebound in real estate contributed to the rise in wealth. However, while asset wealth rose, Americans depleted cash reserves during the quarter. Holdings in deposit accounts and money market funds declined for a record fifth consecutive quarter. See article at Reuters.com.

6. Average consumer spending rose 9% last year

The Bureau of Labor Statistics reported that the average household spent $72,967 last year, a 9% increase from 2021. Spending on transportation was a big contributor to the rise. Average spending on gasoline, other fuels, and motor oil was up 45.3%, while average spending on public transportation rose 86.9%. Housing costs, the largest component of household spending, were up by 7.4% last year. See news release at BLS.gov.

7. Consumer borrowing still rising

The amount of consumer debt outstanding increased in July, though at a slower pace than the prior month. Total non-mortgage consumer debt rose by $10.4 billion in July, which, if continued, would represent a 2.5% annual rate of increase. The prior month, non-mortgage consumer debt rose at a 3.4% annual rate. The mix of credit is becoming harder to handle. Revolving debt rose at a 9.2% annual rate in July, compared with a mere 0.3% for non-revolving debt. Revolving debt typically carries a higher interest rate than non-revolving debt and is more exposed to rate increases. See article at Morningstar.com.

8. August retail sales not as strong as they appear

Retail sales were up 0.6% in August, handily beating the Wall Street consensus estimate of a 0.1% gain. However, the number seems to be driven by increased prices rather than gains in actual consumption. The 0.6% increase kept pace with the same increase in monthly consumer prices. Notably, the top gain for retail sales was in the gas station category. This coincided with a strong gain in gasoline prices for the month. See article at Yahoo.com.

9. Mortgage rates resume upward course

After two consecutive weekly declines, 30-year mortgage rates rose last week. This resumes a rising trend that has seen 30-year rates increase by over a full percentage point since the end of January. Last week, 30-year rates rose by six basis points to 7.18%. In contrast, 15-year rates eased by one basis point last week to 6.51%. Overall, 15-year rates have risen even more than 30-year rates since January. See the latest rates at FreddieMac.com.

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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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