A Moving Picture of U.S. Household Debt

June 21, 2012

This week’s chart shows the components and level of U.S. household debt from March 1999 through March 2012. Categories of U.S. household debt include Mortgage, Home Equity Revolving, Auto Loan, Credit Card, Student Loan (which the Fed began tracking as an independent category in the first quarter of 2003), and Other which includes consumer finance and retail loans.

In its Quarterly Report on Household Debt and Credit, the Federal Reserve Bank of New York announced that total household indebtedness was $11.44 trillion as of the first quarter of 2012. The effects of U.S. household balance sheet repair since the 2008 recession can be seen in the above chart: after household debt peaked at $12.68 trillion in the third quarter of 2008, U.S. households have reduced total debt levels by $1.24 trillion (10.8%). In addition to a reduction in consumer spending, total debt levels were reduced due to banks exercising greater caution when issuing credit cards and mortgages. All categories of household debt decreased during this time with the exception of student loans which grew by 47.9%. During this time, college tuition costs continued to rise and households took on greater amounts of student loans in hopes of improved employment prospects. Student loans are now the second largest component of U.S. household debt behind mortgages.

As households continue to de-lever and focus on balance sheet repair, their consumption will not be as large of a driver to total GDP as it has been historically, therefore creating another headwind for robust economic growth.