Credit card chargeoffs have inched down. Bankruptcies aren't piling up as fast. Mortgage delinquencies remain low. Consumer debt problems are yesterday's news, right?

Wrong! Though the crisis has ebbed, experts say another uptick in delinquencies is all but inevitable next year, even if, as many expect, the economy continues to expand.

Although growth in credit card and other installment debt has slowed significantly, mortgage debt is still rising substantially, as many consumers take out home equity loans to replace card debt.

As a result, a recession would be ugly for banks, economists say.

"When it does come," said Diane Swonk of First Chicago NBD Corp., "it will be bloody."

Bankruptcies are running at a record pace of 1.3 million this year. And "we could face higher bankruptcies, possibly 50% higher" in a recession, said John Nuzum, senior vice president at Chase Manhattan Corp.

"Is that a bloodbath? Not necessarily, but it's not fun," said Mr. Nuzum, who oversees credit policy for mortgage, credit card, and other consumer credit at Chase.

For four years, consumers have added new debt faster than their incomes have grown. That's not unusual in the early years of an economic recovery. After all, consumers are finally buying all the cars, furniture, and appliances they've held off on while jobs were threatened.

But this time around, consumer debt growth is on the verge of setting a record.

By midyear, consumers owed $1.25 trillion in installment debt on credit cards, auto loans, department store credit, and the like. If debt growth outpaces income growth in the third quarter, it would be the 17th quarter in a row. Previously, the longest such period ended in the second quarter of 1966, after 16 quarters.

On the bright side, consumer debt growth slowed to 7.6% last year, from 14.5% in 1994. In the second quarter, when durable goods sales were weak, it grew by 4.2%.

"It's not so much that people are living within their means-they're just not living farther and farther beyond their means," said David A. Wyss, research director at DRI/McGraw-Hill.

But even this improvement is partly because consumers are shifting from one brand of debt to another.

A growing number of consumers are taking advantage of the easy availability of home equity loans to pay off high-rate credit card and auto loans-thus converting installment debt into cheaper, tax-deductible home equity debt. Home equity loans, which are estimated to have totaled $400 billion at midyear, have grown by about 20% in each of the last four quarters.

Thus, mortgage debt growth-though slower than last year-is still sizable. It grew by 6.4% in 1994, 6% in 1995, 7.9% last year, and 5.4% in the second quarter, and totaled $3.7 trillion at midyear.

Another warning sign is a rise in the ratio of debt payments to disposable income. At midyear households were spending 17.1% of their disposable income making principal and interest payments.

Despite low interest rates, the debt burden has risen steadily over the past four and a half years. It is at its highest level since 1989-just before the last recession-when households devoted 17.3% of their income to paying off debt.

"Consumer indebtedness is the most significant risk to the economy right now," said Mark Zandi, chief economist of Regional Financial Associates.

Mr. Zandi and others worry most about low- and moderate-income borrowers, who are stretched thinner than the national numbers suggest. Those groups have used debt to maintain lifestyles, because their incomes are stagnant, experts say. They are also the ones to be hit hardest in a recession.

And, the experts caution, though recent credit problems have caused credit card and other lenders to shy away from soliciting low- and moderate-income business, that won't last. "The bottom line," said Ms. Swonk, "is the money is still there to be lent."

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