In January, retail sales came in much hotter than expected. Now we know how consumers paid for the spending spree. They put it on credit cards.
After slowing modestly in December, growth in revolving debt spiked again in January. But a slowdown in non-revolving credit moderated the overall increase in consumer debt.
Overall, this signals a pretty bleak trajectory for the economy.
After charting its biggest increase since 2007 in the third quarter, household debt surged again in Q4 as Americans try to borrow their way out of the squeeze soaring price inflation has put on their wallets.
Total household debt rose by $394 billion in the last quarter of 2022, according to the latest New York Fed Household Debt and Credit report. It was the biggest quarter-on-quarter rise in two decades.
Consumer debt grew at a slower pace in December, but Americans continued to rely heavily on credit cards to keep up with high price inflation.
The CPI data for December buoyed markets and raised hopes that the Federal Reserve is winning its war against inflation. But in his podcast, Peter explained that the Fed isn’t winning the war. It is losing and will ultimately surrender to inflation.
Rising consumer debts colliding with rising interest rates is a ticking time bomb.
Over the last several months, consumer debt has climbed at a steep, steady pace as Americans struggle with rising prices. November was no different, with consumers piling on another $27.9 billion in debt.
For the last several years, we’ve enjoyed the fruits of an economic bubble blown up by easy money and debt. But ultimately, that debt is going to be the economy’s undoing. Simply put, these debt levels are unsustainable without runaway inflation.
So, pick your poison.
After household debt grew by the largest amount since 2007 in the third quarter, American consumers kicked off the fourth quarter by piling on even more debt.
Consumer debt grew by another $27 billion in October, a 6.9% year-on-year increase. Americans now owe $4.73 trillion in consumer debt, according to the latest data released by the Federal Reserve.
With real wages decreasing and inflation running rampant, Americans are burying themselves in debt to make ends meet.
After setting a new record in the second quarter, household debt increased at the fastest pace in 15 years during Q3, as American consumers have run up credit card balances month after month this year as they cope with higher prices. Meanwhile, rising interest rates have ballooned mortgage balances.
With prices rising and real wages falling, many Americans are struggling to make ends meet. They are increasingly turning to credit cards and other debt to fill the gap. But that creates other problems. Debt has to be repaid and a growing number of Americans are struggling to keep up with payments.
Auto loan delinquencies have risen to the highest level in over 10 years, according to TransUnion.
Credit card debt continues to spiral higher as consumers struggle with rising prices and depleted savings.
In August, revolving credit increased by a staggering 18.1% as total consumer debt surged to a record $4.68 trillion, according to the latest consumer credit data from the Federal Reserve.