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Americans Finally Taking on More Debt - 10/22/15

American consumers continue to ramp up their borrowing.  After several years of de-leveraging, more households are now confident enough to place more debt on their household balance sheets.  According to recently released data from the Federal Reserve, consumer borrowing expanded by sixteen billion dollars in August, pushing the total amount of outstanding debt to a new record of roughly three point five trillion dollars. 

As reported by the New York Times, borrowing for car and student loans rose by 12 billion dollars in August while borrowing in the category that includes credit cards expanded by 4 billion dollars.  Many economists predict that consumer spending will remain strong during coming months as households remain willing to take on additional debt.  Were it not for that willingness, U.S. economic growth would be much softer. 

Wages in the U.S. continue to rise about two percent per annum, which means that in the absence of debt accumulation, consumer spending growth would be much softer.  Consumer spending continues to be the primary driver of economic growth in America, particularly because of the recent slowdown in manufacturing and exports, which is largely attributable to a weaker global economy and stronger U.S. dollar.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.