The latest U.S. Economic and Credit Trends Outlook webinar from Equifax featured guest speaker Cristian deRitis, Senior Director at Moody’s Analytics. In addition to the customary review of recent economic and consumer credit trends delivered by Equifax Chief Economist, Amy Crews Cutts, Cris presented a consumer credit forecast for 2018. Today’s post highlights a portion of the Q4 update focused on consumer household debt. Information referenced herein is sourced from Equifax Credit Trends database or as cited.
Household Debt: Creeping Up
Total consumer credit, as measured in the Equifax Credit Trends database, has been on the rise since the recession trough in mid-2013. In September 2017, consumer debt outstanding reached a new all-time peak at $12.89 trillion. This includes auto, bankcard, mortgages, home equity, and all other outstanding consumer debt. Some are concerned that consumers are over-leveraged and contraction is imminent. However, taking into account the effects of inflation, real total consumer debt today is 18.2% lower than its 2008 peak, and, separately, taking into account just the effects of population growth, total average consumer debt for adults 18 and older has fallen from a peak of $51,044 to $47,493.
What’s more, consumer debt levels seem to be supported by current income levels, as consumers have been readjusting their balance sheets over the past decade to more appropriately align with their incomes, and low interest rates have made the debt they do have less expensive. Evidence of this is shown in the debt service ratio, published by the Federal Reserve Board, indicating the average consumer’s required payments on outstanding debt as a share of disposable income. The financial obligations ratio starts with required payments on debt and also takes into account auto leases and rent payments and compares that to disposable income.
The current debt service ratio is at an extremely low level relative to history. The financial obligations ratio is tied with previous lows and has risen recently as residential rents have risen sharply. Very low debt burdens and rising employment and income are keeping delinquency rates low.
For additional information and to learn about 2018 consumer debt expectations, view the complete Q4 U.S. Economic and Consumer Trends Outlook webinar online today.
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