The report points out that economic expansion in the U.S. has become increasingly dependent on the growth of credit. Therefore, any slowdown in borrowing now has a greater dampening effect on GDP. Consumer credit is a good indicator of the potential future spending levels seen in retail sales and shows the extent to which benchmark interest rates.
The data released earlier this week shows mortgage debt was $8.69 trillion in the second quarter, up $329 billion from last year. Student loan debt was $1.34 trillion, up $85 billion, and auto loan debt came in at $1.19 trillion, up $55 billion.
Increasing obligation at these levels might appear to be negative and a sign of scary times ahead. However, it also may be positive – fuel for the growing economy. The question of most Americans is whether the economy can hold up under this massive growth in debt. The answer is in the details of the data, so let’s peel back this onion.
There are six underlying components to consumer debt. The best way to examine each section is to look at them as a percentage based on absolute dollars, taking into effect inflation and population growth. Below is a chart that shows the growth of each sector at three distinct points in time:
|
2003 |
2008 |
2017 |
|||||
| Home Mortgage |
5.0% |
9.75% |
9.25% |
||||
| Home Equity Revolving |
.25% |
.25% |
.25% |
||||
| Auto |
.75% |
.75% |
2.00% |
||||
| Credit Cards (revolving) |
.75% |
.75% |
.75% |
||||
| Student Loans |
.25% |
.25% |
1.75% |
||||
| Other |
.25% |
.25% |
.25% |
||||
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