Business economists celebrated the 2023 holiday season with a sense of relief. Despite concerns about a possible recession, consumers continued to spend, increasing holiday spending over 2022 levels by 3%.
A consistent refrain on Wall Street in early January was “the consumer is okay.” But a new report from the Federal Reserve Bank of New York suggests how consumers are keeping their heads above water.
In the third quarter of 2023, Americans’ credit card balances rose to $1.07 trillion, a massive debt, financed at record-high interest rates. Balances rose by $154 billion year-over-year, the largest increase since 1999, just before the start of a recession.
Another recent theme in the media has been “the economy is fine, why are consumers so down?” A YouTube poster going by the handle of “TheBigDogHimself” gave an answer to that question.
“What's killing me is the fact that my property taxes have tripled from $3900 per year to now $14,000 yearly,” they wrote. “And I guess I'd be fine with it if my property value had tripled, but it's gone from $297k in 2002 to a supposed $378k this year. And I'm sure everyone understands no one is going to give us $378k in this economy."
There may be other pain points within the economy. While unemployment is low and incomes have risen over the last 12 months, prices of some products and services are surging.
Have you priced insurance lately?
It’s true that the cost of gasoline is about the same as last year and grocery prices have leveled off, but consumers are being pinched in other areas, such as home and auto insurance.
“My wife and I had been Allstate customers for more than 40 years,” Steve, of Phoenix, wrote in a ConsumerAffairs review. “Last year our auto insurance rates increased by 26%, no accidents, no tickets, no change in vehicles. Our homeowner insurance went up 21% in the same year, no claims, no issues.”
That seems typical. When it reported the Consumer Price Index (CPI) for December, the Bureau of Labor Statistics noted that the cost of car insurance was up 20% year-over-year, adding to the financial burden of coping with an increasing credit card balance.
In its report, the New York Fed found that 49% of consumers with a credit card carry a balance from one month to the next. It also reported that 56 million cardholders have been in debt for at least a year.
Earlier this month, doxo, a financial services firm, released a study showing 70% of consumers are worried about their financial health as they head into the new year and 85% of consumers are just as worried about keeping up with household bills in 2024 as they were last year.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-01-16 11:54:24
