U.S. Household Debt Rose Last Quarter at Fastest Rate Since 2007

(Bloomberg) -- U.S. household debt jumped in the fourth quarter at the fastest pace of this expansion while wealth gains continued amid a rising stock market, underscoring the forces behind recent strength in consumer spending, a Federal Reserve report showed Thursday.

Highlights of Household Wealth (Fourth Quarter)

  • Household debt increased at 5.2% annual rate, most since 4Q 2007, after 3.5% in 3Q
  • Net worth for households and non-profit groups rose by $2.08t q/q, or 2.1%, to $98.7t after a downwardly revised $1.65t gain
  • Value of financial assets, including stocks and pension-fund holdings, increased by $1.7t to $80.4t

Key Takeaways

The pace of household debt accumulation during the quarter reflects the Fed’s previously reported outsize 7.8 percent annualized rise in consumer credit, along with a 3 percent gain in mortgage borrowing. Such activity helped fuel a 3.8 percent rise in consumer spending in the period, the fastest in more than a year. Figures released Wednesday showed Americans put away their credit cards in January, as revolving credit outstanding rose by the least since early 2015.

At the same time, Americans who own stocks and residential real estate benefited from gains in both asset types. The S&P 500 Index rose 6.1 percent last quarter, the best performance in two years. That advance preceded a correction in February; the index was up 2 percent this year through Wednesday. The median price of an existing home climbed 5.3 percent nationally in the final quarter of 2017 from a year earlier, according to the National Association of Realtors.

Other Details

  • Household real-estate assets rose by $454.3 billion, most since third quarter of 2016; owner’s equity as share of total real-estate holdings climbed to 58.8 percent from 58.4 percent
  • Companies had $2.5 trillion in liquid assets, up from $2.43 trillion in the prior quarter, providing fodder for increasing corporate investment
  • Total non-financial debt grew at a 2.9 percent annual pace
  • Federal government obligations fell an annualized 0.2 percent
  • State and local government debt rose at a 4.2 percent pace while business borrowing increased at a 3.7 percent rate

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