NY Fed says household debt up in third quarter as rising incomes ease debt burden

By Michael S. Derby

NEW YORK (Reuters) – Rising income levels helped Americans manage their expanding debt loads during the third quarter, even as some signs of stress mounted, the New York Federal Reserve said in a report released on Wednesday.

The regional Fed bank said in its latest Quarterly Report on Household Debt and Credit that total levels of debt during the recently finished quarter rose 0.8% from the prior quarter to $17.94 trillion. Total (EPA:TTEF) debt levels are up $3.8 trillion since the close of 2019, before the COVID pandemic struck.

As debt levels rose, so did troubled borrowing. The New York Fed said borrowing that currently is in some form of delinquency rose to 3.5% of the outstanding borrowing during the third quarter, up from 3.2% in a similar status during the second quarter.

At the same time, types of debt moving into troubled status during the quarter were mixed, with credit card delinquency transition rates ebbing but trouble rising “slightly” for auto-related debt and mortgages, the New York Fed said in a press release. Some 126,000 consumers had a bankruptcy added to their credit reports, down a touch from the prior quarter.

It noted that the overall rise in debt levels should be viewed in the context of households doing better with their incomes.

The New York Fed said in a separate blog post that during the third quarter Americans’ total disposable income reached $21.8 trillion and the ratio of the balance between total debt to income moderated to 82%, below the 86% ratio seen at the end of 2019. “Relative to incomes, balances are actually lower than they were before the pandemic,” the blog posting said.

New York Fed researchers also said in a media call that delinquency levels were something to watch, but overall household balance sheets are in pretty good shape.