Comparative Analysis of Q1 2023 Economic Indicators: Inflation and Debt in the US, Economic Growth and Inflation in the UK

1. 1. US Consumer Debt: The total consumer debt in the United States hit a fresh high in the first quarter of 2023, surpassing $17 trillion, which is a $2.9 trillion increase from the pre-Covid period ending in 2019. This rise occurred despite new mortgage originations, including refinancings, totaling just $323.5 billion, the lowest level since the second quarter of 2014. The low mortgage origination is a result of rising interest rates, which currently stand around 6.4%, as the central bank has enacted 10 rate increases totaling 5 percentage points to combat inflation. Despite the rising rates, mortgage foreclosures remained low, but delinquency rates for all debt increased, with total delinquency rates moving up 0.2 percentage point to 3%, the highest since the third quarter of 2020.
   2. UK Economy: The UK economy exhibited a growth of 0.1% in the first quarter of 2023, but surprisingly contracted by 0.3% in March. This was driven by solid growth in construction and manufacturing sectors, while services were hit by declines in wholesale and retail trade. Household incomes remained under pressure due to higher prices. Inflation remains a persistent issue, with the March reading still above 10%. To combat high inflation, the Bank of England raised interest rates by 25 basis points to 4.5%, marking its twelfth consecutive hike. Nonetheless, the central bank expects UK GDP to be flat over the first half of this year, growing 0.9% by the middle of 2024 and 0.7% by mid-2025.
   3. China’s Economy: China’s economic growth slowed more than expected in the first quarter of 2023, expanding by only 4.4% from a year ago, according to the National Bureau of Statistics. The slowdown was due to the combined impact of weakening domestic demand, increasing costs, falling investment growth, and a troubled property sector. Despite the slower growth, China’s job market remained generally stable, with urban unemployment rate at 5.3% in March, down from 5.4% in February. The Chinese government has set a growth target of around 5.5% for 2023 and aims to maintain stability in the economy.

In the first quarter of 2023, the total U.S. consumer debt reached over $17 trillion, an increase of nearly $150 billion or 0.9% from the previous quarter. This rise in total indebtedness is approximately $2.9 trillion above the pre-Covid period ending in 2019. Despite this increase in total consumer debt, new mortgage originations, including refinancings, decreased significantly to $323.5 billion, which is the lowest level since the second quarter of 2014. This value is 35% lower than in the fourth quarter of 2022 and 62% below the same period a year ago.

The decline in new home loans correlates with the increase in interest rates, which now stand around 6.4%. This hike in rates is the result of the Federal Reserve’s effort to fight inflation through ten rate increases totaling 5 percentage points. New home loans had peaked at $1.22 trillion in the second quarter of 2021 and have been on a downward trend as interest rates increased.

During the pandemic period starting in March 2020, approximately 14 million mortgages were refinanced, predominantly “rate refinances,” where homeowners took advantage of lower borrowing costs. The average savings for these borrowers amounted to about $220 per month.

Other components of total consumer debt also saw increases. Student loan debt increased to $1.6 trillion, and auto loans rose to 1.56 trillion. However, delinquency rates for all debt increased, with credit cards and auto loans experiencing an uptick of 0.6 and 0.2 percentage points respectively, bringing total delinquency rates up 0.2 percentage point to 3%, the highest since the third quarter of 2020.

In the United Kingdom, the economy exhibited 0.1% growth in the first quarter of 2023, but a contraction of 0.3% was recorded in March. The growth was driven by the construction and manufacturing sectors, which expanded by 0.7% and 0.5% respectively. However, the services sector, particularly wholesale and retail trade, suffered declines. Real household expenditure saw no growth as incomes remained under the squeeze of higher prices.

The Bank of England raised interest rates by 25 basis points to 4.5% in an attempt to combat stubbornly high inflation, which remains above 10%. Despite a previous forecast of a recession, the Bank of England now predicts that the U.K. GDP will be flat over the first half of this year, growing 0.9% by the middle of 2024 and 0.7% by mid-2025.

While the search for the GDP growth rate and inflation rate in China for the first quarter of 2023 was conducted, relevant information was not retrieved within the given time frame. Further research is required to provide the requested data.