US household Debt Levels Edge Up In Q2

• Total U.S. household debt levels edged up in the second quarter, but overall delinquency rates stabilised, indicating that borrowers are still in decent enough shape to support the economy, a report from the Federal Reserve Bank of New York said on Tuesday.
• The bank report, part of its survey of household debt and credit conditions, showed that overall debt levels rose by $109Nn, or 0.6%, in the second quarter to $17.80 trillion. Overall borrowing levels are now $3.7Tn above where they were at the end of 2019.
• Worse-than-expected job market data last week has made financial markets nervous that the economy may be on the cusp of a downturn. Fed policymakers, who already signaled they expect to begin cutting rates in September now that inflation is near the 2% target rate, have said they don't want to wait too long before lowering rates and have cited delinquencies as one area they are closely monitoring.
• On that front, there was some relief with the report showing that overall delinquency rates remained at 3.2%, unchanged from the first quarter, and still well below the 4.7% rate seen at the end of 2019 before the coronavirus pandemic. However, transitions in delinquent borrowing levels rose slightly in the second quarter for credit cards and auto loans, both remaining elevated although the pace of worsening slowed.
• Mortgage balances were up by $77Bn to $12.52Tn, while auto loan levels increased by $10Tn, and overall credit card borrowing outstanding rose by $27Bn by the end of the quarter to $1.14Tn. Credit card balances during the quarter were 5.8% above the level they stood at a year ago. Retail cards and other consumer loans were effectively flat, while student loan balances declined by $10Bn.

(Source: Reuters)