Consumer Credit and Consumer Prices Both Rise Sharply

​Last week the Department of Labor released its June reading on the Consumer Price Index, and the Federal Reserve released its consumer credit figures for the month of May. Both measures experienced stark upward growth during their respective months and over the twelve months prior.

• Consumer credit growth accelerated sharply in May, according to a Federal Reserve report on Monday. Total consumer credit increased $24.6 billion during May, doubling economists’ expectations for the month and contributing to an annual growth rate of 7.6% through May 2018. That is the fastest annualized pace of consumer credit growth since November of last year. According to Michael Feroli, the chief U.S. economist at JP Morgan Chase, much of the growth is due to consumer spending snapping out of its first quarter cold streak, fueled by credit card usage.
  

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• Consumer prices rose at their fastest rate in six years, according to the Department of Labor’s Consumer Price Index. For the trailing twelve months through June, the index rose 2.9%, its largest annual gain since February 2012 and an uptick from May’s reading of 2.8%. Excluding food and fuel, which are volatile segments that can skew the index, prices rose 2.3% for the last twelve months. Rising commodity prices (raw input prices) and a tightening labor market are expected to maintain upward pressure on consumer prices throughout 2018. U.S. tariffs on other markets have yet to be fully priced into inflation, as prices have not been passed onto consumers, some analysts suggest. Regardless, the Federal Reserve is not worried about inflation overshooting its target 2% rate. The FOMC still expected to raise rates two more times in 2018 to help keep the economy from overheating.