September 19, 2022
The nasty ripple effects of inflation can spread wide and we’re seeing it now with American households. The continual rising prices, especially on necessities like food and gas, are starting to eat into the average American’s finances.
For example, U.S. household debt increased to a record $16.15 trillion in the second quarter. The rise was driven mostly by a $207 billion jump in mortgage balances, though credit card balances and auto loans also reflected more borrowing by U.S. households.
Delinquency rates rose too for all debt, though they didn’t skyrocket, and remain historically low. Still, the hardest hit people were those with lower incomes. Could we see more delinquencies? Perhaps, given the rising debt balances:
Debt is clearly going up. On top of that, business activity contracted for the first time in nearly two years in July as a sharp slowdown in the service sector outweighed modest growth in manufacturing.
All in all, we’re looking at a grim picture for the economy. That shouldn’t be too surprising given how American finances are being negatively affected by soaring inflation, rising interest rates, and deteriorating consumer confidence.