According to the latest quarterly report on household credit by the New York Fed the total household debt rose to a new record of $13.54 trillion. It was the 18th consecutive quarter with an increase and the total is now $869 billion higher than the previous peak of $12.68 billion in the third quarter of 2008.
Student and auto loans each hit fresh record highs of $1.46 trillion and $1.27 trillion, respectively. And credit-card debt jumped to $870 billion, matching its 2008 peak for the first time.
“Auto loan originations for 2018 reached an all-time high in our dataset and the growth has been driven by creditworthy individuals. Despite auto debt’s increasing quality, its performance has been slowly worsening,” said Joelle Scally, Administrator of the Center for Microeconomic Data at the New York Fed. “Growing delinquencies among subprime borrowers are responsible for this deteriorating performance, and younger borrowers are struggling most acutely to afford their auto loans.”
Outstanding student loan debt increased to $1.46 trillion from $1.44 trillion.
There were $144 billion in newly originated auto loans, continuing the nine-year growth trend. In fact, auto loan originations totaled $584 billion in 2018, the highest year in the 19-year history of the data for auto loan originations (in nominal terms).
Credit card balances rose by $26 billion to $870 billion. The increase in credit card balances is consistent with seasonal patterns but marks the first time credit card balances re-touched the 2008 nominal peak.
The number of credit inquiries within the past six months – an indicator of consumer credit demand – declined to the lowest level seen in the history of the data.
I have long suspected that the first cracks are likely to appear in the credit markets, be it the corporate credit market or the consumer variety. As Bloomberg reported:
Auto-Loan Delinquencies Are The Highest Since 2012
More Americans than ever are at least three months behind on their auto loans, a sign that the U.S. economy may have little growth left in the tank.
The number of loans at least 90 days late exceeded 7 million at the end of last year, the highest total in the two decades the Federal Reserve Bank of New York has kept track. Expressed as a percentage of total debt, the delinquency rate is the highest since 2012, as overall borrowing has also increased.
Do the equity and other asset markets care yet? Doesn’t appear so.
US equity volatility has subsided again and implied volatility trades at a substantial discount to one month realized volatility. The indices including small caps have largely retraced the steep declines in Q4 of 2018.
The U.S. dollar is ripping higher despite the Fed’s dovish pivot. Iron ore is surging as the world’s biggest consumer of industrial metals, China slows down meaningfully.
Confused yet? Watch this space.