Total household debt reached $17.05trillion (trillion) -the highest amount in history-in the first quarter of 2023 (Q1), according to the quarterly report on household debt and credit released by the Federal Reserve Bank (Fed) of New York.
The study - based on nationwide Consumer Credit Panel data - reflected a $148 billion (0.9%)increase in debt levels over the final quarter of 2022 (Q4).
HHDC_2023Q1 by Verónica Silveri on Scribd
The data also revealed that debt increased by $2.9 trillion compared to that recorded at the end of 2019, before the economic crisis unleashed by the covid-19 pandemic.
A first quarter with record levels
The first quarter of the year reflected an increase to record levels in nearly every major category of consumer debt:
- Mortgage balances: the level of debt stood at $12.04 trillion (an increase of $121 billion compared to the last quarter of 2022).
- Student loans: debt reached $1.6 trillion (+$9.0 billion)
- Auto loans: the balance stood at $1.56 trillion (+$10 billion).
- Credit card debt balances: debt remained stable ($986 billion). However, this is the first time in 20 years that this debt has not declined in Q1. Credit card balances always decrease in the first quarter of the year as people seek to lower their spending after holiday shopping - a period when debt peaks. Matt Schulz, chief credit analyst at LendingTree, stated, "The fact that they did not fall in the first quarter of this year does not bode well for the rest of the year."
- Other consumer loan balances: stood at $5.1 billion (increasing by $5.0 billion).
The figure reveals enormous financial stress
The findings of the report challenge the argument used by the
Biden Administration
that the national economy is strong. In Washington they argue that inflation is falling, jobs are increasing and that recent bank failures are not a warning of deeper problems ahead.
However, among the main reasons for the historic increase in debt are "rapidly rising prices for gasoline, food, rent and other basic necessities, which have devastated household budgets."
The reality is that millions of people livepaycheck to paycheck and middle class families typically live under great financial stress. Many people depend on their salary to pay their monthly expenses and have no savings range.
A case in point, a new Bankrate survey revealed that young people are increasingly using credit cards to cover their daily expenses: 42% of 27-42 year olds(Millennials) increased their use of credit during 2022. As well as 27% of people aged 43 to 58(Generation X).
Ted Rossman, senior industry analyst at Bankrate, noted:
