U.S. Households Return to Cutting Debt

State and local government debt was essentially flat after rising by 0.8% in the second quarter. Federal debt rose by 6.25% in the quarter, well below last quarter’s 10.9% increase and the smallest increase since 2007.

Total U.S. household debt dropped slightly from the second quarter to $12.9 trillion. Total borrowing by U.S. households fell by $261.7 billion in the third quarter, after rising by nearly $161 billion in the previous quarter.

Household net worth rose by $1.7 trillion in the third quarter, largely due to higher home prices. However household real-estate assets remain 17% below their 2007 levels.

U.S. households have cut their collective debt by about 13% since the beginning of the recession in late 2008.

The flow of funds report is available here.

Paul Ausick

http://www.federalreserve.gov/releases/z1/Current/z1.pdf