Household debt chart from Federal Reserve Bank of New York (FRBNY)
The FRBNY Household Debt Report shows new record debt levels in the fourth quarter of 2021.
Household Debt Details
- Mortgage balances shown on consumer credit reports increased by $258 billion during the fourth quarter of 2021 and stood at $10.93 trillion at the end of December.
- Balances on home equity lines of credit (HELOC) were up very slightly, bucking a declining trend in place since 2016Q4, and keeping the outstanding balance at $318 billion.
- Credit card balances increased by $52 billion, the largest quarterly increase observed in the 22 year history of the data.
- Despite the substantial increase, credit card balances are $71 billion lower than at the end of 2019.
- Auto loan balances increased by $15 billion in the fourth quarter, a change similar to that seen in the fourth quarter in the previous two years.
- Student loan balances contracted by $8 billion in the fourth quarter of 2021, and marked a $21 billion increase since 2020Q4 –the smallest annual increase seen in nearly two decades.
- In total, non-housing balances grew by $74 billion, boosted additionally by a $15 billion increase in other balances.
Total Debt Balance
Total debt chart from FRBNY with data from Equifax
Total Debt Balance by Delinquency Status
Delinquency status chart from FRBNY with data from Equifax, arrows by Mish
Delinquencies decline over time until they suddenly surge in recession.
It's Time to Discuss Recession
Most do not see the looming recession. I do.
On January 28, I commented With Nearly Everyone Looking the Other Way, It's Time to Discuss Recession
The economy is not soaring as widely believed. Details show weakness and there are six strong reasons to believe that weakness will accelerate.
I later revised 6 strong reasons to eight.
What Can Go Wrong?
- The Fed is hiking
- Stimulus has worn out
- The stock market is stumbling
- Pending Homes Sales Unexpectedly Decline 3.8 Percent in December
- Merchants are stockpiling and pre-ordering everything
- Retail sales are falling
- Major deceleration in deficit spending.
- Declining working age of the population will reduce productivity.
I now expect a recession no later than the end of 2023.
Q: I have been asked if I mean the end of 2022.
A: Actually, I tend to be early, so I gave myself some purposeful leeway.
A 2022 recession is certainly not out of the question nor would it be a bit surprising.
Rising interest rates are already sapping the economy and the Fed has not even begun to reduce QE liquidity as it expects to do.
The current headwinds are powerful just as government "helicopter drop" stimulus is rapidly waning.
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