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News roundup May 18, 2024

finance news May 18 2024

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Credit Sesame’s personal finance news roundup May 18, 2024. Stories, news, politics and events impacting personal finance during the past week.

Consumer debt continues to grow

The quarterly New York Fed report on Household Debt and Credit shows that the risk of consumer debt continues to grow. Total consumer debt rose by $184 billion in the first quarter of 2024 to a record $17.69 trillion. On a percentage basis, home equity lines of credit were the fastest-growing debt category, with an increase of 4.44%. Not only are consumer debt balances growing, but the amount becoming seriously delinquent is growing at an accelerating rate. The rate of balances becoming 90 days or more overdue has now grown for nine consecutive quarters. Credit card debt has the biggest late payment problem, with 6.86% of balances becoming 90 days or more overdue in the first quarter. See report at NewYorkFed.org.

Inflation slows but remains above target

The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose by 0.3% in April 2024. This is slower than the 0.4% increase recorded in February and March 2024. However, even at this slower pace, the CPI is still rising faster than the Federal Reserve’s inflation target of 2.0%. A 0.3% monthly increase calculates to an annual inflation rate of nearly 3.7% over an entire year. This would represent an acceleration over the 3.4% increase in the CPI over the past 12 months. See Consumer Price Index report at BLS.gov.

Consumer purchasing power outpaces inflation

A new CBO report measured the share of after-tax household income required for regular annual purchases, which the report refers to as a “consumption bundle.” Surprisingly, from 2019 through 2023, the percentage of income needed for a typical consumption bundle declined for every income group. Top earners made out the best, with the percentage of income required to pay for their consumption bundles declining by 6.3% over the period. Even the lowest fifth of earners came out ahead, though, with the percentage of income required to pay for their consumption bundles declining by 2.0%. That means even these low earners saw their incomes grow by more than the prices of goods. See report at CBO.gov.

Plan to cap credit card late fees delayed

A federal judge has issued a temporary injunction to delay the implementation of a rule that would have capped most credit card late fees at $8. The rule was to have gone into effect on May 14, 2024. The judge’s order is not a final ruling but a delay to give the court time to consider the case. The US Chamber of Commerce has challenged the proposed fee cap on the grounds that the Consumer Financial Protection Bureau has overstepped its bounds by creating the limit. See article at UPI.com.

Consumer sentiment suffers a significant downturn

The University of Michigan’s widely followed survey of consumer sentiment showed that the mood about the economy has soured this month. Overall, consumer sentiment fell by 12.7% in May. The assessment of current conditions fell by 12.9%, and expectations for the future fell by 12.5%. The downturn follows three months of reasonably stable consumer sentiment. Despite the recent decline, overall consumer sentiment has increased by 14.2% over the past 12 months. See news release at UMich.edu.

Biden announces new tariffs

President Biden has sharply increased the tariffs on a range of imports from China. These include quadrupling tariffs on Chinese electric vehicles, raising them to over 100% of the original cost of those vehicles. Other goods impacted by new tariffs include steel, aluminum, semiconductors, batteries, and solar cells. Critics have raised concerns that the new tariffs could slow the adoption of electric vehicles in the US. They are also likely to add to the persistent inflation pressures that have plagued consumers and driven interest rates higher. See article at Reuters.com.

Consumers expect more inflation and less income growth

The latest Survey of Consumer Expectations from the New York Fed found that consumers expect 3.3% inflation over the next year, up from 3.0% in the last survey. The median expectation for household income growth fell by 0.1% to 3.0%. Consumers continue to expect their spending to grow faster than their income. The median expectation for household spending growth over the next year rose by 0.2% since the last survey to 5.2%. See survey highlights at NewYorkFed.org.

Producer prices signal more inflation

The Producer Price Index rose by 0.5% in April, following a 0.1% decline in March 2024. Producer price changes tend to vary more from month to month than consumer prices but ultimately affect the prices that consumers pay. Producer costs of services rose by more than the cost of goods. Service costs were up by 0.6% in April, while the cost of goods was up by 0.4%. See report at BLS.gov.

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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