Finimize - 🏆 The UK broke a (dismal) record

What’s going on here?

US consumers could feel the pinch as student loan repayments resume, potentially putting a damper on spending.

What does this mean?

Starting October 1st, those with student loans will once again feel the weight of monthly payments, typically around $200 to $300. And for the record, this is the first time they’ll be parting with that cash since the Education Department hit the pause button back in March 2020. During that generous break, instead of chipping away at their debt, many treated themselves to luxuries like high-end TVs and spontaneous trips. So it’s no surprise that this spending spree played a part in keeping the US economy robust – even as interest rates flirted upward.

Why should I care?

For markets: No doomsday yet.

Retail behemoths like Target, Walmart, and Best Buy depend on consumers’ penchant for non-essentials, so this news has got them biting their nails. But many of these borrowers aren’t living paycheck to paycheck – and they might overlook the looming loan shadows to make room for the odd splurge. Plus, economists have pointed out these repayments are just a drop in the ocean, accounting for a mere 0.4% to 0.6% of total consumer spending. So while this move has added a slightly wobbly piece to the US’s economic Jenga tower, it’s unlikely to topple the thing entirely – especially in an era of rising wages and low unemployment.

The bigger picture: Wait and see.

Regardless of the impact, the bottom line is that government policy changes are adding unneeded volatility. To make things even tougher, auto workers’ strikes are cranking up the pressure on the economy – and with debt levels rising and folk saving less, credit card balances have hit a whopping $1 trillion. So while today’s loan repayments might seem like small potatoes, they could spell trouble down the line.

What’s going on here?

Britain's rental scene isn't just heating up – it's on fire, with the cost of rent soaring faster than it has in at least a decade.

What does this mean?

Higher interest rates are making it uncomfortably expensive to buy a home, but rising lease costs aren’t making rental life particularly cushy either. New rental agreements had tenants shelling out 12% more in August compared to the previous year – the sharpest rise since UK property broker Hamptons started tracking the figures in 2014. That’s far from normal: UK rents have risen more in the past year alone than they did from 2015 to 2019, combined. And much of this stems from a supply-demand mismatch: rising mortgage rates have pushed more people to rent, while slowing construction and causing some landlords to sell up and quit the market.

Why should I care?

For you: The rent, as they say, is too damn high.

It’s a tough crumpet to swallow for Brits who are already saddled with the worst cost-of-living crisis in a generation. Renting is supposed to be the fallback option for those who can’t afford to buy. But as rents rise faster than wages, the cost of renting is fast becoming a more grueling stretch and putting those dreams of homeownership even further out of reach. And that’s not likely to help consumer confidence – or the economy.

For markets: The UK’s keeping its hiking boots on.

This data suggests inflation’s likely to remain a problem – at least for the foreseeable future. And that’s unwelcome news for the Bank of England as it convenes this week. The central bank’s been battling the country’s high inflation with a steady barrage of interest rate hikes and this data implies its fight might be far from won. So if you’re wading into UK stocks and bonds, brace for a splash – these waters could remain choppy for some time.