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Economist: Consumer debt jump "a good sign"

Posted: February 18, 2014

Jared Council's picture

Inside Business Staff Blogs

by Jared Council

U.S. household debt posted its largest quarterly gain in about six years, the New York Federal Reserve reported Tuesday, a sign that may bode well for the overall economy.

Household debt surged $241 billion in the final quarter of 2013, or 2.1 percent, which was the biggest gain since the third quarter of 2007. Old Dominion University economist Gary Wagner said the figures strongly suggest consumers have turned a corner in their willingness to take on more mortgage, credit card and student loan debt.

“During the recession and until now, households have been deleveraging, which means they’ve been reducing their debt burdens,” Wagner said. “Instead of buying goods and services, people were paying down their debt.

“One of the reasons why I think the economy is going to grow faster this coming year is households are now going to be taking the money they were using to pay down their debt balances at a much faster rate and buy goods and services.”

In the latest quarter, total indebtedness stood at $11.52 trillion. It peaked at $12.68 trillion in the third quarter of 2008.