Thursday, February 28, 2013

Fed: Consumer Debt increased slightly in Q4, "Deleveraging Process Decelerates"

by Bill McBride on 2/28/2013 11:00:00 AM

From the NY Fed: Total Consumer Debt Up Slightly as Deleveraging Process Decelerates

In its latest Household Debt and Credit Report, the Federal Reserve Bank of New York announced that in the fourth quarter of 2012 outstanding consumer debt increased slightly ($31 billion), breaking the downward trend observed since the fourth quarter of 2008. The increase was primarily due to a rise in non-housing debt and the stabilization of mortgage debt.

Total consumer indebtedness was $11.34 trillion, 0.3% higher than the previous quarter but considerably lower than its peak of $12.68 trillion in the third quarter of 2008. While outstanding mortgage debt remained roughly flat, originations of new mortgages rose to $553 billion, a fifth consecutive quarterly increase.

Non-housing debt balances increased for the third straight quarter and now stand at $2.75 trillion, up 1.4% in the fourth quarter. All non-housing components increased; auto loans up $15 billion, student loans up $10 billion and credit cards up $5 billion.

The data provides early evidence that consumers may be reaching the end of the four year deleveraging cycle, though we’ll need to see if this is sustained in upcoming quarters,” said Andrew Haughwout, vice president and economist at the New York Fed. “At the same time, we observed mixed developments, mortgage originations increased and fewer accounts entered the foreclosure pipeline but delinquency rates remain considerably higher than pre-crisis levels.”
emphasis added
Here is the Q4 report: Quarterly Report on Household Debt and Credit
Mortgages, the largest component of household debt, were roughly flat. Mortgage balances shown on consumer credit reports stand at $8.03 trillion, roughly unchanged from the level in 2012Q3. Home equity lines of credit (HELOC) were the only product to see a substantive decline in the fourth quarter; balances dropped by $10 billion (1.7%) and now stand at $563 billion. Non-housing household debt balances increased for the third consecutive quarter and now stand at 2.75 trillion, up by 1.3% in the fourth quarter. All non-housing components increased, with auto loans up by $15 billion; student loans up by $10 billion, and credit card balances up by $5 billion.
About 336,000 consumers had a bankruptcy notation added to their credit reports in 2012Q4, a 21% drop from the same quarter last year, and the eighth consecutive drop in bankruptcies on a year-over-year basis.
Here are two graphs:

Total Household Debt Click on graph for larger image.

The first graph shows aggregate consumer debt increased slightly in Q4.

Student debt is still increasing. From the NY Fed:
Outstanding student loan balances increased by $10 billion during the fourth quarter, to a total of $966 billion as of December 31, 2012.
Delinquency Status The second graph shows the percent of debt in delinquency. In general, the percent of delinquent debt is declining, but what really stands out is the percent of debt 90+ days delinquent (Yellow, orange and red).

From the NY Fed:
Overall, delinquency rates continued to improve in 2012Q4. As of December 31, 8.6% of outstanding debt was in some stage of delinquency, compared with 8.9% in 2012Q3. About $978 billion of debt is delinquent, with $712 billion seriously delinquent (at least 90 days late or “severely derogatory”).
There are a number of credit graphs at the NY Fed site.

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