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News roundup January 20, 2024

finance news roundup January 20

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Credit Sesame’s personal finance news roundup January 20, 2024. Stories, news, politics and events impacting personal finance during the past week.

  1. Producer prices fell in December 2023
  2. More Americans prioritize debt reduction
  3. Corporate default rate soared in 2023
  4. Retail sales continue to grow
  5. Discover earnings reflect weakening credit conditions
  6. Mortgage rates resume descent in January 2023
  7. New York Fed highlights debt struggle for lower-income households
  8. Mortgage applications beginning to respond to falling rates

Producer prices fell in December 2023

The Producer Price Index (PPI) declined by 0.1% in December. This gives hope that the surprisingly high Consumer Price Index increase during the month was just a one-time blip rather than the start of a sustained trend. The drop in the PPI was attributed to a 0.4% decline in the price of goods during the month. The price of services remained essentially unchanged. Overall, the PPI was up by just 1.0% in 2023, a considerable improvement after 2022’s 6.4% inflation. See report at BLS.gov.

More Americans prioritize debt reduction

A new survey found that an increasing number of Americans would put an unexpected income increase toward debt reduction. 38.4% of respondents said they would put an unexpected 10% raise toward paying down debt. That’s up from 33.8% a year ago and is the highest since August 2016. Another 45.6% say they would put the money towards savings or investments, while just 16% say they would spend or donate it. Though the responses are based on a hypothetical raise in pay, they at least show an increasing awareness of the importance of debt reduction. See news release at NewYorkFed.org.

Corporate default rate soared in 2023

It’s not just consumers that are having trouble making their debt payments. One hundred fifty-three companies failed to make required debt payments in 2022, an 80% increase over 2021’s total of 85. The missed payments indicate general financial weakness, as these companies generally had negative cash flows, high debt burdens and weak liquidity. Media and entertainment companies were especially prone to these problems. Experts are concerned that more companies may face defaults in the months ahead as debt initially taken out at low-interest rates becomes due and has to be rolled over at today’s much higher rates. See article at CNBC.com.

Retail sales continue to grow

Retail sales grew by 0.6% in December 22023, even after allowing for normal seasonal differences. The year-over-year increase was 5.6%, well above the 3.4% inflation rate over that period. Food and beverage establishments enjoyed a solid growth. Sales in these places were up 11.1% last month compared to December 2022. See news release at Census.gov.

Discover earnings reflect weakening credit conditions

Discover Financial Services announced disappointing fourth-quarter earnings, partly because it has set aside more money to cover the risk of customers defaulting on their credit card payments. The company has set aside $1.9 billion to cover potential credit losses, which they’ve increased by $1 billion over the last year. The reason for the increased caution can be seen in Discover’s rising charge-off rate. Charge-offs are unpaid bills a credit card company doesn’t believe it will be able to recover. Discover’s charge-off rate has increased from 2.13% to 4.11% over the past year. See article at Morningstar.com.

Mortgage rates resume descent in January 2023

After three weeks of increases, 30-year mortgage rates resumed a downward trend that began at the end of October 2023. 30-year rates dropped by 0.06% last week to reach 6.6%. This puts 30-year rates at their lowest level since last May. Similarly, 15-year rates also fell to their lowest level since last May. A 0.11% decline brought 15-year rates down to 5.76% last week. Despite a falling trend lasting over two months, both 15-year and 30-year rates are still above where they were a year ago. See rate details at FreddieMac.com.

New York Fed highlights debt struggle for lower-income households

The Federal Reserve Bank of New York has released a new report on The State of Low-Income America: Credit Access & Housing. The report found that new delinquencies on auto loans and credit cards for low-income borrowers started rising in 2022 and 2023 and are now above pre-pandemic levels. Also, low-income homeowners were less likely to take the opportunity to refinance their mortgages when rates were low. Only 24% of mortgages in low-income areas were refinanced in 2020 and 2021, compared with 42% of mortgages in high-income areas. See report at NewYorkFed.org.

Mortgage applications beginning to respond to falling rates

The Mortgage Bankers Association reported that mortgage applications were up by 10.4% last week on a seasonally adjusted basis. The improvement came after mortgage rates had been falling for over two months. However, despite the short-term rise, purchase applications are still 20% lower than for the same week a year ago. On the other hand, refinance applications are up 10% from a year ago. See details at MBA.org.

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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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