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The warning signs in consumer credit data
U.S. households are borrowing more than ever to buy homes and cars, pay for college and even finance every day purchases.

The Federal Reserve Bank of New York said in September that consumer debt hit a record $12.96 trillion in the third quarter of 2017, as student and auto loan totals reached all-time highs and mortgage and credit card debt crept closer to pre-financial-crisis levels.

It’s an eye-popping figure to be sure, but should lenders be spooked by it?

The New York Fed has noted that its data is not adjusted for inflation, and the cost of goods and services has risen by more than 10% since 2008, the last time total consumer debt neared the $13 trillion mark. Moreover, the U.S. population has increased by about 7% during that span, which means that, on a per capita basis, consumer debt is actually lower than it was a decade ago.

Another sign that households are managing their debt reasonably well: Foreclosures hit a new historical low in the third quarter, according to the New York Fed.

Still, there are reasons to be concerned about rising debt levels. The personal savings rate hit a 12-year low at the end of 2017, which means that many households likely do not have enough of a financial cushion to weather sudden economic shocks, like a major medical bill or a busted refrigerator. Delinquencies on all types of consumer loans, while nowhere near 2009 and 2010 levels, have started to tick up in recent quarters. Factor in slow wage growth and high housing costs in many urban markets and it is not hard to imagine many households struggling to keep pace with their monthly bills.

It’s too soon to say what this all means for banks, but not too soon point out the warning signs. Here they are.


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