The Federal Reserve Bank of New York’s Q1 report on household debt and credit is out, and it was the first quarter where total consumer debt held steady after nine straight quarters of declines:
The report contains mostly decent news, and indicates that deleveraging through defaults and charge-offs continues to be less and less of an issue — total household delinquency rates declined for a fifth straight quarter, and both new foreclosures and new bankruptcies fell from Q4 levels.
Mortgage loan originations climbed for the third straight quarter, while credit card and auto loan balances decreased. But the number of credit card accounts finally stopped falling, and aggregate credit card limits actually increased.
More detail from the NY Fed’s summary:
– an increase in credit limits, by about $30 billion or 1%, for the first time since the third quarter of 2008;
– a steady number of open mortgage accounts, following a period of decline beginning in early 2008;
– continued decline of new foreclosures and new bankruptcies, down 17.7% and 13.3% respectively in the last quarter;
– a 15% decline of total delinquent balances, compared to a year ago; and
– a broad flattening of overall consumer debt balances outstanding. …
Non-housing related debt, including credit cards, student loans, and auto loans, declined slightly (less than 1%), driven by a noticeable 4.6% decline in credit card balances. Credit inquiries, an indicator of consumer demand for new credit, came off their recent peak in the fourth quarter of 2010.
“We are beginning to see signs of credit markets healing gradually and evidence of greater willingness of consumers to borrow and banks to lend,” said Andrew Haughwout, vice president and New York Fed research economist.
We still wonder to what extent the activity in household debt is being driven by fluctuations in credit standards vs voluntary changes in consumer behaviour, but the report does help explain why consumption in the Q1 GDP numbers was better than expected.
Related links:
US deleveraging isn’t just about defaults and charge-offs – FT Alphaville
Household deleveraging and consumer-led growth – FT Alphaville
US deleveraging and consumption, in progress – FT Alphaville