The above chart shows that U.S. household debt as a percentage of disposable personal income has doubled since the early 1980’s. Yesterday’s post showed that the increase in U.S. household debt service ratios over the same time has been more modest. This is largely because of the sharp decline in interest rates over the past few decades. While declining interest rates kept a lid on debt service ratios, the same declining interest rates helped lead to a dramatic expansion in household debt relative to income.
Data source:
U.S. Federal Reserve - Flow of Funds report
U.S. Bureau of Economic Analysis (Table 2.1)
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The above chart shows the U.S. household debt service ratio (DSR) as a percentage of personal disposable income vs. the 10-year U.S. treasury rate (a proxy for overall interest rates). As the chart shows, the DSR has increased even with the dramatic decline in interest rates. Declining interest rates make servicing debt less expensive. However, as you can see from yesterday’s chart, the significant increase in total household debt since 1980 has lead to a higher DSR in spite of falling interest rates.
What happens if interest rates start heading up? In an increasing interest rate environment household DSRs can increase even if overall household debt declines. A large portion of household debt is fixed-rate mortgages. Increasing interest rates will not increase the cost to service that debt. However, variable-rate debt would become more expensive to service as interest rates increase. Check back tomorrow for another view of household debt.
Data source:
U.S. Federal Reserve
Note:
The household DSR is an estimate of the ratio of debt payments on outstanding mortgage and consumer debt to disposable personal income.
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The first chart above shows the historic growth in U.S. household debt. The second chart shows the distribution of U.S. household debt as of the fourth quarter of 2008. Tomorrow I will have a chart on debt service ratios.
Data source:
U.S. Federal Reserve, G.19. and Flow of Funds report.
The second chart above uses the Fed’s Flow of Funds Q4′08 data on household debt. It also uses the distribution of revolving and non-revolving consumer credit from the G.19 report.
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The above chart shows a historical view of who holds (owns) U.S. consumer credit (does not include mortgage debt). The main observation from this chart is the dramatic role securitization has played in the growth of consumer debt.
Data Source:
U.S. Federal Reserve
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The above chart shows a historical view of total U.S. consumer credit per household. It also breaks out the data for revolving and non-revolving credit. In March 2009, U.S. per household consumer credit was $22,857. This was off of the record of $23,140 hit in July 2008.
The purpose of this chart is not to imply that every household has this much consumer debt. The purpose is to help provide some perspective as to how much consumer debt is outstanding. When we see numbes like $2.5 trillion dollars of consumer credit it is difficult to understand exactly what it means. I find that seeing this type of data on a per capita or per household basis helps me understand the magnitude. Below is a chart that shows per capita U.S. consumer credit - just another perspecitive.
Data source:
U.S. Federal Reserve
U.S. Census Bureau
Note: Does not include mortgage debt.
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The above chart is a historical view of the growth in U.S. credit card debt per household. In March 2009, U.S. credit card debt per household was $8,475. This is off of the record high reached in September 2008, of $8,729. Americans haven’t always been addicted to plastic. In March 1969, the U.S. credit card debt per household was only $37.
Data Source:
U.S. Federal Reserve
U.S. Census Bureau
Data is seasonally adjusted
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The above chart shows the growth in consumer credit in the U.S. over the past 40 years. The chart breaks out the data for revolving and non-revolving credit. Note that revolving credit is basically credit card debt, and non-revolving credit is debt from things like autos, boats, student loans. Consumer credit does not include mortgage debt.
Check back tomorrow to see a historical view of U.S. credit card debt on a per household basis.
Data Source:
U.S. Federal Reserve. G.19
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This is the first in a series of posts on consumer debt. The above charts show two views of consumer credit in the U.S. The first chart is a view of consumer credit in March 1969, and the second chart is a view of consumer credit in March 2009. Two observations: 1) consumer credit has greatly expanded in the past 40 years (big surprise), and 2) Revolving credit (credit card debt) has grown from almost nothing to over a third of consumer credit now.
Notes:
I tried to make the two charts to scale. PieR2 calculation (it was a little difficult to measure on my screen, but I think it is pretty close).
Revolving credit is basically credit card debt, and non-revolving credit is debt from things like autos, boats, student loans. All data is seasonally adjusted.
Please note that consumer credit does not include mortgage debt.
Data Source:
U.S. Federal Reserve. G.19.
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