Credit card balances were up 3.0% from March 2019, but CPI inflation was up 13%, LOL. Auto sales fell, but auto loans jumped. You guessed it, ridiculous price increases.
By Wolf Richter for WOLF STREET.
Credit card balances rose 1.9% in March from February, unseasonally adjusted, to $1.036 billion, according to the Federal Reserve today. Compared to three years ago, March 2019, the last March before the pandemic, this was only up 3.0%.
In other words, credit card balances are only 3% higher than three years ago, after three years of inflation, including runaway inflation over the past 12 months that has drive up the prices of almost everything consumers buy with their credit cards.
In the three years in which credit card balances increased by a total of 3%, CPI inflation jumped by 13%. In other words, even credit card borrowing can’t keep up with this runaway inflation, LOL, and their credit card debt, the most expensive debt, is growing slower than longer term inflation is for once a good thing for American debt slaves:
Note in the table above how consumers paid off their credit cards and other revolving credit during the first 12 months of the pandemic, then they started charging again, gradually returning to where they were on a nominal basis, but without never catch up. with inflation and a “real” base.
Seasonal adjustments galore.
Consumer spending is highly seasonal, as is the use of credit cards. The sales peak each year in December and fall in January and February. Massive seasonal adjustments are used to smooth this out. In March, these seasonal adjustments added $62 billion to the revolving credit balance and pushed the figure up to $1.097 billion, seasonally adjusted, up 2.9% from February.
This graph shows actual revolving credit balances (red line) and seasonally adjusted revolving credit balances (green line):
Car loans and leases in the first quarter – this is quarterly data, not monthly – jumped 1.6% from the fourth quarter and 7.6% year-on-year, to reach a record of 1, 34 trillion, according to the Federal Reserve today.
This increase in auto loans and leases was accompanied by a drop in purchases of new vehicles and a drop in purchases of used vehicles, accompanied by an increase in the price of the saint-moly.
- The CPI for passenger vehicles in the first quarter jumped 35% year-over-year.
- The CPI for new vehicles jumped 12.5%.
These ridiculous price increases had the bizarre effect that consumers reduced their purchases of vehicles but borrowed far more to finance them:
The majority of outstanding auto loan balances come from the purchase of new vehicles, rather than used vehicles, due to their much higher prices – the average transaction price for new vehicles in the first quarter was around 47 $000.
But first-quarter new-vehicle sales fell 15.8% year-on-year and 17.7% from the first quarter of 2019, to 3.28 million vehicles, the worst quarter since 2011, and back there. where they were in 1979. This was due to semiconductor shortages, supply chain chaos, production delays, inventory shortages, and nearly empty dealership lots.
The number of used vehicles retailed by dealers in the first quarter fell, including 15% year-over-year in March.
So what you’re seeing reflected in rising auto loan balances are two big factors, going in opposite directions, with ridiculous price increases winning the game:
- Fall in the number of vehicles sold
- A ridiculous spike in vehicle prices.
So here is the status of American debt slaves: they have to borrow a lot more to finance purchases of a lot less because everything has become so much more expensive, because of this runaway inflation.
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