U.S. Credit Card Debt Increased By $46B In Q2 2022 As Inflation Woes Continue
The Tokenist | Aug 05, 2022 06:08AM ET
Americans pile up credit card debt as surging inflation causes a record increase in consumer debt.
As American consumers increasingly rely on credit amid sky-high inflation, credit card debt surged by 13% annually in the second quarter of 2022. The $46 billion increase, 5.5% higher than the first quarter’s value , marks the most significant increase since 1999, with an uptick in new credit card accounts recorded.
The Federal Reserve Bank of New York’s quarterly report on Household Debt and Credit, released yesterday, noted this increase. It further indicated that household debt at the end of June was $16.15 trillion, up $312 billion from the same quarter a year earlier. The communique noted that rising mortgage, car loan, and credit card balances contributed to the increase.
Source: Federal Reserve Bank of New York’s quarterly report on Household Debt and Credit
h2 Surging Inflation Propels Increased Borrowing/h2The report highlighted that surging inflation and the corresponding price increase resulted in more Americans borrowing. It noted:
“Americans are borrowing more, but a big part of the increased borrowing is attributable to higher prices,”
Consequently, the figures reported gives new context to the consumer spending data issued by the Bureau of Economic Analysis last week. It showed that spending increased by 1.1% in June as Americans continued to absorb the skyrocketing prices in groceries, gasoline, and staple items.
Since the turn of the year, Americans and the entire world have battled rising inflation caused by loose monetary policies enacted during the Covid-19 pandemic. The situation in the US is critical, with the inflation rate surging to levels last seen over four decades ago. The Consumer Price Index (CPI) for June was 9.1% , beating analysts’ expectations.
The US government has been up in its arms trying to tame the raging inflation, with the Federal Reserve raising interest rates all year. The aggressive nature of the hike has led to growing calls of a vehemently debunked .
h2 Household Debt on the Rise/h2While credit card debt surged in Q2, the Feds quarterly report indicated household debt increased. The data showed a $312 billion or 2% increase in Q2 compared to Q1 2022. Accordingly, overall balances are now $2 trillion higher than before the pandemic.
Get The News You Want
Furthermore, mortgages that saw said :
“The second quarter of 2022 showed robust increases in mortgage, auto loan, and credit card balances, driven in part by rising prices. While household balance sheets overall appear to be in a strong position, we are seeing rising delinquencies among subprime and low-income borrowers with rates approaching pre-pandemic levels.”
Consequently, the challenge of keeping up with growing inflation for consumers is reflected in credit card debts. Increasingly, Americans are forgoing clothing and technological products while shopping for household essentials amidst the surging prices.
h2 Upcoming CPI Critical/h2The upcoming July CPI data release would be critical, with investors, analysts, and consumers all invested. Scheduled for release on Aug. 10, 2022, Americans would be hoping to know if the aggressive interest rate hikes by the Feds have had any impact on inflation.
A reduction in overall CPI would indicate that the economy is responding to the Federal Reserves policies. This would like to see them reduce the aggressiveness of expected hikes for 2022 while also increasing the likelihood of a soft landing. However, if inflation is not curtailed, further aggressive hikes would ensue, eliminating the possibility of a soft landing.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.