Though retail sales have been a bit sluggish of late, data indicate that consumer debt is still on the rise. According to the Federal Reserve Bank of New York, by the end of last year’s third quarter, it totaled twelve trillion dollars. While that’s still lower than the twelve point seven trillion dollar figure that prevailed in two thousand and eight, aggregate consumer debt has been on the rise since late two thousand and thirteen.
Consumers have generally become more confident over time as unemployment rates have fallen and wage inflation has expanded. Falling energy prices have helped, giving consumers both more spending capacity and more confidence. As pointed out by writer Norm Alster, in moderation, debt accumulation can help encourage economic activity. However, when carried too far, it can create bubbles that jeopardize the economy.
Indeed, default rates on bank cards, first mortgages and auto loans rose in November according to the S&P/Experian Consumer Credit Default Indices. Still, household head remains below the peak achieved in two thousand and seven. Despite recent financial turmoil, consumer spending is still expected to grow, with some analysts predicting three percent or better consumer spending growth in twenty sixteen.
