Household Debt Higher for First Time Since 2008 Recession

US household debt climbed 0.3% in the fourth quarter of 2011, the first rise in the number since the second quarter of 2008. Business debt grew by 4.6%, also the fastest rate since 2008. The numbers come from the Federal Reserve’s Flow of Funds report for the 2011 fourth quarter released today.

Consumer credit grew by 7% in the quarter, the fifth consecutive quarter of growth. Household mortgage debt fell by -1.5%, the smallest decline since 2009. State and local government debt fell by -2%, the first time the number has fallen since 1996. Federal government debt rose by 11.5% for the full year, the smallest increase since 2007.

Growing consumer debt could signal either that consumers are feeling more confident about their ability to borrow and repay, or that consumers lack the cash to pay for the things they want or need. The drop in mortgage debt could be the result of a decline in new mortgages, borrowers paying off their existing mortgages, refinancing or purchasing at lower home values, or banks forgiving loans. Most likely is a combination of all these possibilties.

One final number: household net worth fell by nearly -0.75% for the full year, the first annual drop since 2008.

The Flow of Funds report is available here.