Consumer debt levels for March 2022 rose by $52.4 billion, an annual increase of 14%, seasonally adjusted, according to Federal Reserve data. Revolving credit, which includes credit cards, grew 21.4%. Despite strong wage growth—average hourly earnings grew 5.5% in the last 12 months—consumers are seeing these gains offset by the highest inflation in 40 years. The cost of food has risen about 9% over the past year, and a gallon of gas now averages $4.279 at the pump.
The Federal Reserve recently announced a half-point rate hike as part of a series of actions aimed at tackling runaway inflation. This means that interest rates on everything from credit cards to car loans will rise, putting further pressure on the household budget. “All of this newfound debt that Americans have is only going to get more and more expensive in the coming months,” said Matt Schulz, chief credit analyst for Lending Tree. The rise in debt levels is likely driven by two factors, Schulz said. First, there is some pent-up spending after lockdown. Then there are other cash-strapped individuals who are turning to credit cards to pay for basic needs that have grown more expensive, he said.
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