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New York Fed Credit Report Demolishes Myth of Strong Consumer Balance Sheet

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28 comments on New York Fed Credit Report Demolishes Myth of Strong Consumer Balance Sheet

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Please consider the New York Fed Household Debt and Credit Report for 2022 Q2. 

  • Total household debt rose $312 billion, or 2 percent, in the second quarter of 2022 to reach $16.15 billion, according to the latest Quarterly Report on Household Debt and Credit. 
  • Mortgage balances—the largest component of household debt—climbed $207 billion and stood at $11.39 trillion as of June 30. 
  • Credit card balances had a $46 billion increase since the first quarter. The 13% year-over-year increase marked the largest in more than 20 years.
  • Aggregate limits on cards marked their largest increase in over ten years. 
  • Transitions into delinquency ticked up but remained very low compared to historical levels.
  • Auto loan balances increased by $33 billion in the second quarter, continuing the upward trajectory that has been in place since 2011. 
  • Student loan balances now stand at $1.59 trillion, roughly unchanged from the first quarter of 2022. 
  • Other balances, which include retail cards and other consumer loans, increased by a robust $25 billion. 
  • In total, non-housing balances grew by $103 billion, a 2.4% increase from the previous quarter, the largest increase seen since 2016.

Spending Q&A

Q: Why did we have had two quarters of negative GDP with all that spending?
A: Inflation adjusted spending which drives GDP is not keeping up with inflation.

It appears that the alleged pandemic savings has all been spent given that consumers are increasingly turning to their credit cards. 

Regardless, the debt keeps piling up. 

Total Debt Balance and Its Compensation 

Hooray, total debt made another new high.

Aggregate household debt balances increased by $312 billion in the second quarter of 2022, a 2.0% rise from 2022 Q1.

Balances now stand at $16.15 trillion and have increased by $2 trillion since the end of 2019, just before the pandemic recession.

This post originated at MishTalk.Com.

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28 Comments
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Oldest Most Voted
prumbly
prumbly
4 years ago
Riddle me this: inflation was supposedly caused by all the printed free money that was given away during the pandemic, but if that money has all been spent why do we still have inflation? The python swallowed the pig, digested it and it came out the other end already.
I think it’s all about energy prices, which is more of a lack-of-investment, climate-change wacko regulation, Russia-Ukraine kind of thing…
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Casual_Observer2020
Casual_Observer2020
4 years ago
Bullard says higher rates and no recession coming:
My take: it isn’t possible to keep hiking rates until “inflation” comes down without consequences to growth and the job market. Job market appears to be in the process of freezing up as I’ve heard of offers being pulled and offers not being made after candidate was verbally told they would get an offer.
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8dots
8dots
4 years ago
The DOW theory : stage #1 : the big whales move in. Stage #2 : institutions and the crowd move in. Stage #3 : the herd move in,
imitating each other, forming a bubble.
In the last 9 bars, since Q2 2020 total debt is rising vertically up, though lately breadth is slowing down.
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shamrock
shamrock
4 years ago
Household debt was up 2% for the quarter? Inflation was more than that so in real terms debt ticked down, seems like nothing really. I guess the other way of looking at it is debt was up 2%, as was nominal GDP (8% annual, 2% for the quarter).
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Counter
Counter
4 years ago
$16.15 trillion on the first bullet point? Party time
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Carl_R
Carl_R
4 years ago
Can someone explain something to me? Apparently student debt did not rise, yet there is a moratorium on payments. Is it that people are paying on the student loans, anyway, and there is a slowdown in issuing of new student loans, resulting in a flat balance?
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PAncho
PAncho
4 years ago
Reply to  Carl_R
There been a drop in enrollment. At my community college, we closed an older building, and several temp structures, because of low enrollment.
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Casual_Observer2020
Casual_Observer2020
4 years ago
Reply to  Carl_R
My niece goes to a mid-5 figure per year private engineering school and had several friends drop out of school because the parents simply were faced with too many bills after job losses during Covid. I think more people are also questioning the value of what they have to pay to get their children “ahead”. Here in California, community college has become quite popular as its basically paid for by the tax payer. Students then are transferring to a accredited public university for 2 more years to get their 4 year degree. This effectively cuts the debt they have to go into in half (assuming they use debt).
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MPO45
MPO45
4 years ago
Reply to  Carl_R
There is a demographic crisis beyond aging workforce, on the other end there are not enough kids graduating high school. both of these issues will form constructive interference (huge tidal wave) of labor shortages. It will hit your shores around 2030 but you’ll start to see it coming around 2025.
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KidHorn
KidHorn
4 years ago
Reply to  Carl_R
You make a good point. I don’t see how it can possibly be flat. My guess is the student loan data isn’t being updated so as to hide what’s really going on.
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8dots
8dots
4 years ago
The oddity of this debt will reach it’s terminal point, including RE.
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MPO45
MPO45
4 years ago
Excellent reporting Mish. Looks like I missed the boat on ECPG but I will keep an eye for pullbacks. If things get as bad as everyone predicts then these guys will make a killing. For every data driven analysis, there is a profit to be made.
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Christoball
Christoball
4 years ago
Reply to  MPO45
It would be interesting to track how debt acquisition companies profits and stock prices have been as a leading or trailing indicator.
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Rene_FPV
Rene_FPV
4 years ago
As a new homeowner I’m definitely on thin ice and being very careful about spending.
Slightly off topic question that might be worth a post.
Regarding this article:
The premise is the Fed will accelerate their QT efforts starting in September with the expected result of reducing the banks ability to lend (this is my rudimentary interpretation). My question is, would this indicate a continuation of the bear market in stocks into September and beyond?
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Casual_Observer2020
Casual_Observer2020
4 years ago
Globalization wiped out the middle class in developed nations and continues to. The increasing reliance of credit coincides with this along with historically low interest rates. This has been masking a lot of the problems since 2008.
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Robbyrob
Robbyrob
4 years ago
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JackWebb
JackWebb
4 years ago
Reply to  Robbyrob
At the end of the list there’s a link to newspaper print circulation. Those numbers are hard to find. The newspapers don’t want everyone to know just how bad things have gotten.
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footwedge
footwedge
4 years ago
Reply to  Robbyrob
I read the same article and find it hard to believe, at least in the lower median income areas. E.g. buying a median priced home in Mpls and twin cities – around 344k – seem unlikely on income of 74k. Wonder if same holds true in other medium priced areas.
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KidHorn
KidHorn
4 years ago
There are about 127m households in the US. So 312b/127m = $2,456. A lot of debt in 3 months. I know most of it is mortgage, so it’s skewed to a handful of households. But still. And the interest rate is only going to go up.
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Zardoz
Zardoz
4 years ago
Reply to  KidHorn

I wonder if payday loans are booming yet?

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8dots
8dots
4 years ago
House hold debt is rising since 2013. The debt slope isn’t as sharp as the one between 2003 and 2009. In real terms HH debt might deflate. Debt, up at lower speed. Real terms wages and business investments are down. Population growth is up, but the labor force is frozen. Something is wrong. // CC loans, up. Delinquencies are rising in a turtle speed, perhaps because lenders accumulate
zombies loans, paying min monthly at zero rates, to avoid NPL. // China froze 2000 products from Taiwan. Taiwan is top chips mfg
in the world, Korea and Japan, next. Taiwan produce 92% of high end chips under 10 nanometer. S.Korea at 8%. If China block high end
chips before Xmas ==> AAPL will sink NQ & ES.
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KidHorn
KidHorn
4 years ago
Reply to  8dots
“The debt slope isn’t as sharp as the one between 2003 and 2009”
And what happened after that?
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Robbyrob
Robbyrob
4 years ago
The U.S. made a breakthrough battery discovery – then gave the technology to China
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Zardoz
Zardoz
4 years ago
Reply to  Robbyrob
The Chinese would have reverse engineered it the moment they laid hands on one.
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JackWebb
JackWebb
4 years ago
Reply to  Robbyrob
Thanks, Obama!
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Maximus_Minimus
Maximus_Minimus
4 years ago
Reply to  Robbyrob
The critical line is buried deep in the article, and applies universally.
Corning would also transfer Gorilla glass manufacture to China, but acquiring the manufacturing process reveals the technology.
“He said he wanted to manufacture the entire battery in the U.S., but that the U.S. does not have the supply chain he required.”
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JRM
JRM
4 years ago
Reply to  Maximus_Minimus
When you open up manufacturing in China, businesses are required to turn over their technology to the Communist Gov’t!!!
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