ARLINGTON, Va.—On a seasonally-adjusted basis, overall consumer prices increased 0.4% in October following flat inflation in September, while other new data show household debt continues to grow.
The Bureau of Labor Statistics reported the overall consumer price index (CPI) grew 1.8% over the 12-month period.
NAFCU's Curt Long, in a new Macro Data Flash report, attributed the growth to a large increase in energy prices and rises in costs for medical care, recreation and food.
"The spike in energy prices follows two consecutive months of decline, and the index is still 4.1% below its year-ago level," said Long, NAFCU's chief economist and vice president of research. "Shelter costs, which represent one-third of the overall price index, grew by the slowest rate in nine years. Overall, price pressures remain muted and the next Fed rate hike looks to be a long way off."
Interest Rate Cut
As CUToday.info reported, in October the Federal Open Market Committee cut interest rates by 25 basis points, which was the third reduction of the year. Prior to the cuts, the committee had held rates for months; the last rate hike occurred in December 2018. The federal funds target rate is now set at a range of 1.5 to 1.75%.
Core prices (excluding food and energy costs) increased 0.2% in October compared to the previous month. Year-over-year core CPI growth was 2.3%, Long said.
Energy prices also rose in October, increasing 2.7%. From a year ago, energy prices were down 4.1%. Food growth was up 2.1% on a year-over-year basis.
Household Debt Continues to Grow
Meanwhile, household debt has hit a new high, according to the New York Federal Reserve. Consumer debt is now about $1.3 trillion higher than the previous peak set in 2008, although these figures are not adjusted for inflation nor the larger size of today's economy. Household debt has climbed about 25% from the post-recession low of $12.7 trillion, reported CNN Business.
The New York Fed said mortgages remains the largest chunk of Americans' debt, accounting for $9.44 trillion, while student loans climbed by 1.4% to $1.5 trillion and credit card balances rose $13 billion during the third quarter.
Federal Reserve Chairman Jerome Powell warned Wednesday that business debt is "historically high," but signaled he's not particularly concerned about consumer borrowing, noted CNN Business.
"The ratio of household borrowing to income is low relative to its pre-crisis level and has been gradually declining in recent years,” Powell said.
Analyst Urges Rethinking
However, reported CNN Business, Peter Boockvar, chief investment officer at Bleakley Advisory Group, questioned in a note to clients whether the mid-2000s, a period marked by an historic housing bubble, is the best reference point. Boockvar noted that household debt relative to income remains "way above" the levels of the 1980s and 1990s.
Still, the US economy is much larger than it was during previous decades, meaning it can likely handle a higher amount of debt, the report added.