Back-to-school season is well underway, bringing with it the need for supplies, new clothes, books, and more. According to a National Retail Federation survey, back-to-school outlays for the coming academic year will amount to $39 billion, or $875 per household for the K-12 set, while the college-bound will spend an even larger $87 billion in aggregate, or $1,365 per household.

For many American households this comes as another strain on their already fragile finances. Although inflation is moving lower, the general price level continues to rise—just not as quickly as over the last few years. To be sure, prices for some items on back-to-school lists have cooled off. Apparel prices were up a scant 0.2 percent in July compared to a year ago, according to the Bureau of Labor Statistics, while textbook prices actually fell 2.8 percent in the last year. On the other hand, internet access costs 3.9 percent more than a year ago. That new pair of eyeglasses and haircut for the first day of kindergarten? Up 4.3 percent and 4.5 percent respectively.

Moreover, accumulated increases in already expensive necessities like housing and childcare are devouring household budgets as described in a recent Wall Street Journal article.

The battle to bring inflation under control has not been without collateral damage. For example, the labor market that was humming early in the aftermath of the pandemic is rapidly softening. This is weighing on job openings, hiring, income growth—and confidence. According to the Federal Reserve Bank of New York’s July 2024 SCE Labor Market Survey: "respondents reported the highest expected likelihood of becoming unemployed in the 10-year history of the survey." The survey also found that "the average expected wage offer from a prospective new job was lower than at the same time last year in July."

At the same time high interest rates tight lending standards and an adverse regulatory environment are limiting consumers’ access to credit they need to cover those back-to-school or day-to-day expenses The June 2024 SCE Credit Access Survey also conducted by New York Fed found that application rates for consumer credit fell between February and June while rejection rates for those submitting applications increased markedly over same time period

This is concerning news for consumers who want use credit as tool manage their budgets at time financial stress well economy cusp cyclical inflection point Look more insights into consumer credit environment from lenders’ perspective AFSA’s Consumer Credit Conditions Index (C3 Index) next installment C3 Index which draws on survey member finance companies will released soon

August 21st 2024