Americans Aren’t Struggling Despite Rising Consumer Debt

Consumer debt is at a record level — but in terms of handling it, there are no signs that Americans are struggling, reported The Wall Street Journal.

According to a report citing data from the Federal Reserve, consumer debt — which includes credit cards, auto loans, student loans and personal loans — is expected to hit $4 trillion this year. The increase in consumer debt comes at a time when the levels of mortgage debt are close to where they were right before the last turndown in the housing market. According to The Wall Street Journal, mortgage debt was at $10.3 trillion at the end of the third quarter, which is 2.8 percent higher than the third quarter of 2017. Mortgage debt reached a high of $10.7 trillion in the early part of 2008 before the Great Recession, noted the paper. “Debt increase is [a] sign of a strong economy,” Dana Peterson, an economist at Citigroup, told The Wall Street Journal in the report.

The paper noted that the increase in borrowing on the part of consumers is being driven by lenders willing to lend more as the memories of the financial crisis fade away. Consumer debt began to decline in 2008 — and then in 2014, it started to pick up again as lenders relaxed standards, particularly in the areas of credit cards and car loans, noted the paper. According to data from Experian, the credit scoring company, consumers owe on average $6,826 on credit cards, which is 1.9 percent higher than September of 2017 and 11 percent higher than 2011. New car loans are averaging $30,977, which is the highest for any third quarter and is up 2 percent from 2017 and 11 percent from four years prior.

What’s making the debt manageable on the part of consumers is wages that are increasing, an economy in the U.S. that is growing and unemployment that currently stands at a fifty year low. There are also interest rates that are still at historic lows that are helping. The Wall Street Journal noted that signs that consumers are starting to struggle with their consumer debt aren’t present. Consumer loan losses remain low and consumer spending is on the rise, increasing an average of 2.7 percent in the past four quarters through September when compared with the year-earlier time frame. Citing Moody’s Investors Service, the WSJ reported that disposable income increased 2.7 percent on average in the past four quarters through September. Personal savings of 6.3 percent in the third quarter were higher than the twenty year average of 5.9 percent.