US deleveraging continues

Last night the NY Fed released its quarterly update on US household credit trends. This is an excellent document that boils down complex credit aggregates to more easy to understand charts. The headline numbers showed continued deleveraging:

Aggregate consumer debt fell slightly in the fourth quarter. As of December 31, 2011, total consumer indebtedness was $11.53 trillion, a reduction of $126 billion (1.1%) from its September 30, 2011 level.

It is interesting to note that last year, for all its troubles, actually illustrated a pretty decent credit performance with households holding the line for much of the year. However, the downtrend continues, none more so than in mortgages:

Mortgage balances shown on consumer credit reports fell again ($134 billion or 1.6%) during the quarter; home equity lines of credit (HELOC) balances fell by $12 billion (1.9%). Household mortgage and HELOC indebtedness are now 11.0% and 11.7%, respectively, below their peaks. Consumer indebtedness excluding mortgage and HELOC balances again rose slightly ($20 billion or about 0.8%) in the quarter. Consumers’ non-real estate indebtedness now stands at $2.635 trillion. Student loan indebtedness rose slightly, to $867 billion.

Note that credit cards and auto loan numbers have bottomed whilst housing related accounts continues to slide. The same pattern is apparent in loan balances.

On the recovery of credit cards:

Aggregate credit card limits rose by $98 billion (3.6%) during the quarter, resuming the trend of increases observed in the first half of the year. During 2011Q4 the number of open credit card accounts rose by 3 million, to 386 million, but remained 22% below its 2008Q2 peak of 496 million. Balances on those cards were 19.1% below their 2008Q4 peak of $870 billion. The number of credit inquiries within six months – an indicator of consumer credit demand – increased again, by 2.7%, in 2011Q4, and this measure is now 16.1% above its 2010Q1 trough.

Rising limits but still falling balances. Is that preparing for goods times or a rainy day? At least in terms of delinquencies it’s still raining, pouring actually:

After a mild uptick in 2011Q3, total household delinquency rates resumed their downward trend in 2011Q4.As of December 31, 9.8% of outstanding debt was in some stage of delinquency, compared to 10.0% on September 30. About $1.12 trillion of consumer debt is currently delinquent, with $824 billion seriously delinquent (at least 90 days late or “severely derogatory”) About 289,000 individuals had a foreclosure notation added to their credit reports between September 30 and December 31, a 9.5% increase from the 2011Q3 level of new foreclosures, but 35.3% below its 2010Q4 level. New bankruptcies in 2011Q4 were 14.9% below their levels of 2010Q4, at 425,000.

With 10% of loans on some form of delinquency, you really do have to wonder where the US banks would be without the Fed’s variously engineered carry trades. Dead, I guess. Instead, it remains living dead.

DistrictReport_Q42011