Credit Demand in U.S. Markets Eased Slightly in Q3

The Federal Reserve’s Financial Accounts report for the third quarter was published yesterday, December 7. It shows that credit demand in the U.S. totaled $3,269.1 billion seasonally adjusted annual rate in Q3, which amounted to 11.8% of GDP. This was down slightly from the $3,419.0 billion in Q2, which was 12.6% of GDP. Note that the GDP amount is in current dollars, the same measurement scale as credit demand. Note that the quarterly data are at annual rates, so they can be compared to the yearly data and also to GDP and to the disposable personal income data we mention. The credit demand measures in both of these most recent quarters are down from the sizable $5,105.3 billion in Q1, which was a more substantial 19.0% of GDP.

Nonfinancial sectors borrowed $3,775 billion saar in Q3, down from $4,445 billion in Q2. The federal government was yet again the largest borrower, with $2,968 billion in Q3 after $3,440 billion in Q2.

Households were the next largest borrowing sector, although their borrowing in Q2 and Q3 was much smaller than the federal government’s with $495 billion in Q3 and $528 billion in Q2. This household borrowing was just 2.4% of disposable income in Q3 and 2.6% in Q2. People borrowed $323 billion in home mortgages in Q3, very similar to $368 billion in Q2 and $348 billion in Q1; their use of consumer credit was $52 billion in Q3, just over half of the $103 billion in Q2.

Nonfinancial businesses borrowed $323 billion in Q3, slightly less than the $388 billion they borrowed in Q2 and noticeably less than the $957 billion in Q1. In fact, these Q3 and Q2 amounts are the smallest business borrowing since the second half of 2020. The two major types of business borrowing were both relatively modest. The amounts of credit raised through debt securities were only $94 billion in Q3 and $143 billion in Q2, which followed $562 billion in Q1. Borrowing by loans was $249 billion in Q3 and $245 billion in Q2, both annual rates; these are moderate amounts, although loans had been quite strong in 2022, totaling $1,058 billion.

Foreign borrowing in U.S. markets and institutions was modest in Q3, just $15 billion at an annual rate, after $206 billion in Q2 and $86 billion in Q1; these followed a total of $290 billion during 2022.

Financial institutions in the U.S. had paid down $1.232 trillion in debt in Q2, and they paid down another $520 billion in Q3. They paid down $13 billion in debt securities in Q3 after paying down $258 billion in Q2. In contrast, they had raised $1.538 trillion in debt securities in Q1 and $1.275 trillion during all of 2022. The same quarterly pattern applied to financial institutions’ use of loans in recent periods. In Q3 they paid down $520 billion after paying down $1.232 trillion in Q2. But in Q1, they had raised $2.367 trillion, and during all of 2022, they raised $1.623 trillion.

Net wealth in the U.S. economy decreased in Q3, as it fell $761.6 billion after an increase of $6.171 trillion in Q2. These data are quoted at actual, not annualized or seasonally adjusted amounts. On September 30, net wealth stood at $141.9 trillion, down from $142.6 trillion at the end of Q2, which was the all-time high. Household net worth was $151.0 trillion on September 30, down slightly from $152.3 trillion on June 30, which was also the all-time high.

The Financial Accounts data are in Haver's FFUNDS database. The Federal Reserve is the main source, while associated information is compiled in the Integrated Macroeconomic Accounts produced jointly with the Bureau of Economic Analysis (BEA); those nonfinancial data are carried in Haver's USNA database as well as in FFUNDS. Note that revisions are common throughout the accounts with every quarterly release.