U.S. Households Return to Cutting Debt

US Federal Reserve
US Federal Reserve

The flow of funds report published today by the Federal Reserve Bank shows that U.S. household debt fell at an annual rate of 2% in the third quarter of 2012, following a second-quarter jump of 1.2%, which was the largest increase since the first quarter of 2008. Non-financial sector debt rose by a seasonally adjusted annual rate of 4.5% in the third quarter, roughly in line with the increase in the previous quarter.

State and local government debt was essentially flat after rising by 0.8% in the second quarter. Federal debt rose by 6.25% in the quarter, well below last quarter's 10.9% increase and the smallest increase since 2007.

Total U.S. household debt dropped slightly from the second quarter to $12.9 trillion. Total borrowing by U.S. households fell by $261.7 billion in the third quarter, after rising by nearly $161 billion in the previous quarter.

Household net worth rose by $1.7 trillion in the third quarter, largely due to higher home prices. However household real-estate assets remain 17% below their 2007 levels.

U.S. households have cut their collective debt by about 13% since the beginning of the recession in late 2008.

The flow of funds report is available here.

Paul Ausick


Filed under: 24/7 Wall St. Wire, Banking & Finance, Economy Tagged: featured, Federal Reserve Flow of Funds Report December 2012