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Economy in Brief

U.S. Financial Accounts Show More Borrowing But Also Modest Gain in Net Wealth
by Carol Stone, CBE  March 10, 2016

Total borrowing in the U.S. rebounded in Q4 to $4,014 billion at a seasonally adjusted annual rate, according to the Financial Accounts of the U.S., which were released today by the Federal Reserve Board. The large total was mainly due to a whipsaw federal government borrowing which resulted from the debt ceiling crisis in the early autumn. Otherwise, customary borrowing by households and businesses remained moderate. The Q4 borrowing total was 22.1% of GDP, compared to just 5.4% in Q3. For all of 2015, credit market borrowing totaled $2,188 billion, 12.2% of GDP, very similar to the 10-13% range of the previous three years.

The federal government's total credit market borrowing of $2,682 billion SAAR in Q4 consisted of $1,230 billion of marketable bills, notes and bonds, and $1,450 billion of nonmarketable securities. There was also a tiny amount of borrowing of multi-family mortgages. The marketable debt issuance in Q3 had been $496 billion, whereas nonmarketable debt was paid down then at a $471 billion annual rate. The relatively small total in Q3 resulted from the debt ceiling crisis, and trust funds were liquidated then to meet current needs. Later, in Q4, after the debt ceiling was finally raised, the trust funds were replenished, according to the Federal Reserve's explanation and nonmarketable borrowing reflected that need. In the accompanying graph, note the similar patterns in 2011 and 2013.

Borrowing by households did increase in Q4 to $481 billion SAAR, up from Q3's $229 billion. However, this increase, too, was related to a "special factor", as it was concentrated in "other" loans and in business-oriented depository institution loans, which are generally used by hedge funds, not ordinary households. Traditional types of borrowing by households actually decreased somewhat in Q4; home mortgage borrowing was $147 billion, SAAR, down from Q3's $162 billion, and consumer credit borrowing was $207 billion, down a bit from Q3's $246 billion.

Nonfinancial corporate business borrowing decreased to $214 billion SAAR in Q4 from $365 billion in Q3. Corporate bond issuance was just $220 billion SAAR, compared to Q3's $319 billion. Depository institution loans and "other" loans were paid down at a $15 billion annual rate after Q3's $33 billion paydowns. Commercial paper issuance also slowed, to just $23 billion, from $70 billion in Q3.

The financial sector continued its minimal net borrowing pace, just $206 billion SAAR in Q4, following $284 billion in Q3.

Press reports of these Financial Accounts highlight household balance sheets and net worth. Household net worth rose in Q4 to $86.8 trillion (not seasonally adjusted) from $85.2 trillion at the end of Q3. Households' holdings of corporate equities rose somewhat, as did mutual fund shares. Pension fund entitlements, which had decreased in Q3, recovered in Q4. Homeowners' equity also increased.

Net wealth of the total economy also increased in Q4. This measure, recently devised by the Federal Reserve, was $86.8 trillion (not seasonally adjusted level) at year-end, up $1.6 trillion from end-Q3. Much of that, $1.2 trillion, was seen in the increased market value of domestic corporations. Household holdings of nonfinancial assets increased $517 billion, but net U.S. claims on foreign assets went down $263 billion.

The Financial Accounts data are in Haver's FFUNDS database. Associated information is compiled in the Integrated Macroeconomic Accounts produced jointly with the Bureau of Economic Analysis (BEA); these are carried in Haver's USNA database.

Financial Accounts (SAAR, Bil.$) Q4'15 Q3'15 Q2'15 2015 2014 2013 2012
Total Borrowing* 4014 975 2504 2188 2318 2072 1713
Federal Government 2682 22 350 725 736 857 1181
Households 481 229 596 390 419 232 259
Nonfinancial Corporate Business 214 365 673 476 495 424 305
Financial Sectors 206 284 358 167 330 246 -396
*Previously called "credit market borrowing" and includes debt securities plus loans. The total here includes noncorporate business, state and local government and foreign sectors, not shown separately.
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