Consumers resumed borrowing after a pullback in the second quarter during the onset of the pandemic, according to the New York Federal Reserve’s third-quarter report on household debt and credit balances.
The net increase of $87 billion in total household debt outstanding was driven primarily by growth in mortgages, with an $85 billion increase, and auto loans, with $17 billion. These increases can be expected given that housing and manufacturing, coupled with historically low interest rates, have led the economic recovery.
But a deeper look in the report reveals that households still feel a heightened level of anxiety as credit card balances outstanding—an indicator of consumer sentiment and related spending activities—declined for the second straight quarter.
The decline of $10 billion in the third quarter, combined with the decline of $76 billion in the second quarter, represents the largest drop in credit card balances outstanding in the history of the New York Fed’s report.
While the economy has staged a substantial recovery, this new data shows that it still has a long way to go before it fully recovers—which in no small part will depend on the development and distribution of a coronavirus vaccine.