U.S. household debt has reached a new record in the U.S. A report by the Federal Reserve says that American homes’ debt has hit $15.24 trillion as people are splurging with credit cards, and home and car prices skyrocket. The phenomenon is attached to the economic recovery.
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U.S. Household Debt
The report released Tuesday shows that American household debt grew by $286 million in the third quarter, while mortgage balances soared by $230 billion to hit $10.67 trillion, depicting an increase in home prices.
According to the Daily Mail, “Total non-housing balances increased by $61 billion, including a $28 billion jump in auto loan balances as supply chain issues spurred huge increases in the prices of both new and used vehicles.”
Despite being $123 billion lower than in 2019, credit card balances rose by $17 billion while student loan balances hit a further $14 billion.
Donghoon Lee, research officer at the New York Fed, said: “As pandemic relief efforts wind down, we are beginning to see the reversal of some of the credit card balance trends seen during the pandemic, namely reduced consumption and the paying down of balances.”
“At the same time, as pandemic restrictions are lifted and consumption normalizes, credit card usage and balances are resuming their pre-pandemic trends, although from lower levels,” he added.
Next 12-Month Concerns
Inflation has played a role in the record U.S. household debt as the prices of new vehicles have grown by 8.7% since September last year, with used vehicles reporting a 24.4% increase.
The Fed surveyed market participants to determine the main causes for concern ahead of the economic rebound, with 70% pointing to inflation as the main hurdle in the next year. Preoccupation relates to new vaccine-resistant COVID-19 variants and a looming Chinese regulatory crackdown.
On Monday –before the U.S. household debt report– the Fed chair Jerome Powell revealed that the pandemic has been particularly harsh on women given childcare responsibilities.
“As schools closed and childcare services shuttered during the worst of the pandemic, that added responsibility and stress made working more difficult for some and took many away from their jobs,” he was quoted as saying on Fortune.
“Long-standing disparities weigh on the productive capacity of our economy, which can only realize its full potential if everyone has a solid chance to contribute to, and to reap the benefits of, broad-reaching prosperity,” he further added.
