With a surge in home and auto prices, high inflation, and the Covid-relief funds starting to dry out, Americans are starting to use their credit cards more often.
This raised the overall household debt to a new record of $15.24 trillion in the third quarter, the Federal Reserve Bank of New York said Tuesday.
Rise in Mortgages, Auto Loans, and Student Loans Fuel the Debt Increase
Mortgages, the most significant component of household debt, grew by $230 billion last quarter and now total $10.67 trillion.This is partly due to an 11.2% increase in house prices in 2021.
Auto loans and student loan debt also saw an increase in the same period, $28 billion and $14 billion, respectively. Credit card debt is also on the rise and now is $1.1 trillion higher than at the end of 2019.
High Spending Is Driven by High Inflation
Inflation has reached record levels due to supply chain disruptions and high consumer demand.
The latest data gives insight into the prices producers receive for their products growing 0.6% in October and 8.6% over the last 12 months. Higher energy costs are attributed to this rise in prices.
The data about consumer price inflation, which tracks prices paid for housing, bills, food, and similar, is not available yet, but it will probably be high, considering the increased costs the companies are facing.
Companies can only take up so much of the price increase before passing the rising costs down to end consumers. This is particularly the case with small companies, which make up 99.9% of all businesses in the US.