Household Debt Rises As Consumer Price Index Surges

In news that’s surprising to absolutely no one, as the Consumer Price Index (CPI) surged over the last few months, so did household debt. It’s almost like starting an unnecessary war that directly impacts energy prices isn’t great for an already strained economy. 

According to CBS News, inflation increased in April by 3.8%, the highest level it’s been since May 2023. The CPI tracks how prices change over time for a litany of goods and services regularly purchased by consumers. If you’ve had to fill up your tank lately, it should come as no shock that gas prices were responsible for 40% of the CPI increases. Experts have estimated that the increase in fuel prices has added an extra $75 a month in household expenses. 

President Donald Trump’s authorization of strikes on Iran in February has had several downstream consequences on the global economy in the months that have followed. The Strait of Hormuz is a crucial port through which a large portion of the world’s oil and fertilizer supply flows. 

As a result of the war in Iran, the Strait of Hormuz has been closed, with negotiations to reopen it going nowhere. There’s also the issue of several crucial oil refineries in the Middle East being destroyed as a result of the strikes, which experts believe will keep oil prices high in the immediate future. 

“Inflation is the key drag on the U.S. economy now,” Heather Long, chief economist at Navy Federal Credit Union, told CBS News. “This is hurting Americans. There is a real financial squeeze underway. For the first time in three years, inflation is eating up all wage gains.”

Mark Zandi, chief economist at Moody’s Analytics, expects inflation to continue rising throughout the summer regardless of how the war ends, with price increases spreading to food and all other goods delivered through diesel trucks. 

“The pass-through will broaden to nearly all manufactured goods, which are energy-intensive, as well as to agriculture and construction,” Zandi told CBS News. 

With price increases exacerbating the existing cost-of-living crisis, it makes sense that household debt reached an all-time high within the first three months of the year. ABC News reports that the total household debt in the U.S. has reached $18.8 trillion, according to new data from the Federal Reserve Bank of New York. That number includes mortgages, credit cards, auto loans, and student loans. 

Higher balances on mortgage and auto loans have been the significant driver of the debt increase, with inflation also impacting interest rates on both. Outstanding credit card balances are at $1.25 trillion, with credit card debt increasing by $70 billion over the past year. With the cost of fuel and goods increasing significantly, it won’t be a shock if credit card debt drastically rises by the end of the year. 

The Federal Reserve Bank of New York also estimated that 10% of student loan balances are now past due, as people struggle to keep up with their payments. In addition to the rising prices, there’s also the issue of the stagnant job market. Widespread layoffs at tech companies and in the federal government over the last year have meant that recent college grads are having to compete with experienced workers for fewer jobs. 

Instead of doing literally anything to address the cost-of-living crisis, the GOP is approving wars that exacerbate the problem and redrawing maps so that they don’t have to face electoral consequences for their inaction. We love it here. 

SEE ALSO:

Inflation Hit Highest 1 Month Spike In 4 Years Due To Iran War

Iran War Already Increasing Gas Prices, Mortgage Rates

Household Debt Rises As Consumer Price Index Surges Due To Inflation was originally published on newsone.com