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Economy in Brief

U.S. Financial Accounts Show Moderation in Credit Use; Slim Rise in Household Net Worth
by Carol Stone, CBE  June 9, 2016

Total borrowing in the U.S. decreased in Q1 to $2,493 billion at a seasonally adjusted annual rate, down from $3,950 billion in Q4 2015, according to the Financial Accounts of the U.S., released today by the Federal Reserve Board. The Q1 amount represented 13.7% of GDP, compared to 21.7% in Q4 and similar to the general 10-13% range that has prevailed since 2012. Effects of a whipsaw in total borrowing caused by last fall's federal debt ceiling crisis faded away, so that total borrowing could proceed along a steadier path.

Indeed, the federal government's total credit market borrowing was $701 billion SAAR in Q1, near the annual totals of 2013-2015 (see the table below). In Q4, by contrast, the government had borrowed $2,682 billion SAAR. The Q1 amount consisted of $580 billion of marketable bills, notes and bonds, and just $121 billion of nonmarketable securities. Marketable debt issuance in Q4 had been $1,230 billion and nonmarketable debt had risen then at a $1,450 billion annual rate.

Borrowing by households was $379 billion SAAR in Q1, down from Q4's $521 billion. Net new home mortgages were $156 billion, almost the same as Q4's $155 billion. Consumer credit expanded $214 billion, also similar to its Q4 amount, $212 billion. Borrowing by hedge funds and others assigned to the "household" sector was actually quite modest, a mere $9 billion in Q1 compared to $154 billion in Q4. Household borrowing relative to disposable personal income was 2.8% in Q1, similar to the last four years' experience. This compares to paydowns in 2008, 2010 and 2011, but more than 12% from 2003 to 2006. So households seem quite cautious in their use of credit.

Nonfinancial corporate business borrowing expanded noticeably in Q1, to $723 billion SAAR from $234 billion in Q4. Corporate bond issuance was $529 billion SAAR, up from Q4's $215 billion. Depository institution loans increased $161 billion after Q4's slim $35 billion amount, while "other" loans were paid down at a $61 billion annual rate in Q1 after Q4's $82 billion paydown. Commercial paper issuance was similar in the two quarters, $34 billion in Q1 and $23 billion in Q4.

The financial sector continued its minimal net borrowing pace, just $349 billion SAAR in Q1, following $226 billion in Q4.

Press reports of these Financial Accounts highlight household balance sheets and net worth. Household net worth continued to grow in Q1, reaching to $88.1 trillion (not seasonally adjusted) from $87.2 trillion at the end of Q4. Among assets, homeowners' equity rose from $12.6 trillion to $13.0 trillion, but holdings of corporate stocks decreased in value from $14.0 trillion to $13.85 trillion.

Net wealth of the total economy barely changed in Q1. This measure, recently devised by the Federal Reserve, was $80.3 trillion (not seasonally adjusted level), compared to $80.1 trillion at the end of 2015. As with the household sector alone, the market value of corporate businesses lost a marginal amount, while households holdings of nonfinancial assets increased. Net U.S. claims on the rest-of-the-world were slightly more negative, at -$5.7 trillion at end-Q1 versus -$5.6 trillion at end-2015.

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.$) Q1'16 Q4'15 Q3'15 2015 2014 2013 2012
Total Borrowing* 2493 3950 980 2178 2302 2064 1709
Federal Government 701 2682 22 725 736 857 1181
Households 379 522 237 399 424 233 254
Nonfinancial Corporate Business 723 234 382 497 485 406 307
Financial Sectors 349 226 257 165 326 255 -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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