Declining Debts an Economic Delight for 12th Straight Quarter

by Chicago Agent

After declining for the 12th straight quarter, household debt may be the key to economic growth.

Household debt declined for the 12th straight quarter, as a decrease in mortgages pushed total debt down by a seasonally-adjusted 0.6 percent and mortgage debt by 2.4 percent, according to data from the Federal Reserve.

John Wasik, a columnist for Reuters, speculated that falling household debt may be the jump start the economy needs.

Wasik quoted Ingo Winzer, president of Local Market Monitor, a real estate information service, who said falling debt has historically had its benefits.

“After 28 straight months of pulling back on the reins, consumers have finally found a level of debt that feels good enough to allow more spending to flow … During those 28 months, the level of consumer debt per person — let’s leave mortgages out of this — fell 13 percent, from $8,600 to $7,500. During the last recession with a real estate crash, 20 years ago, consumer debt dropped 14 percent,” Winzer said.

Additional data from the Fed included owner equity, which held steady at 38.6 percent from the first quarter, and household net worth, which dipped slightly by 0.4 percent to $16.18 trillion.

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