Total Non-Financial Debt (NFD) expanded at a 4.4% annual rate during Q3 to a record $51.324 TN. Since the end of 2008, NFD has increased $16.3 TN, or 46%. Q3’s NFD growth rate was down from Q2’s 5.2% and Q1’s 6.3% – and lower as well than Q3 2017’s 4.9%. Total Household borrowings accelerated to 3.4% growth from Q2’s 2.9%, led by a jump in Consumer Credit growth (5.4% from 3.7%). Household Mortgages expanded at a 3.1% pace, up from Q2’s 2.7% and the year ago 2.9%.
Evidence of tighter financial conditions, Total Business borrowings slowed markedly. After Q2’s 6.9% rate (strongest since Q1 ’16), Total Business debt growth slowed to 3.9%. The expansion of Corporate (a component of Business) borrowings slowed markedly, from 7.2% to 4.1%. State & Local government debt contracted at a 1.4% pace (Q2 -0.38%). Winning the Piggy Borrower contest, perennially, was our federal government. Federal borrowings expanded at a 6.8% pace, down slightly from Q2.
Yet percentage growth rates don’t do justice late in a Credit Cycle. Outstanding Treasuries expanded $1.187 TN over the past four quarters (7.3%) and $1.774 TN over eight quarters (11.3%). On a seasonally-adjusted and annualized rate basis (SAAR), Q3 federal borrowings expanded $1.180 TN, almost the same as Q2. So far in 2018, federal debt has expanded the most since 2010.
It’s also worth noting that Federal borrowings this year have accounted for in excess of half of Total Non-Financial Debt growth (Q3 SAAR $1.180 TN of SAAR $2.228 TN). Total Household borrowings expanded SAAR $516 billion (mortgage SAAR $314 billion and Consumer Credit SAAR $210 billion) during Q3. Total Business borrowings expanded SAAR $575 billion, with Corporate borrowings increasing SAAR $389 billion. Foreign U.S. borrowings grew SAAR $292 billion.
Outstanding Treasury Securities ended Q3 at $17.419 TN, having now inflated 188% ($11.367TN) since the end of 2007. Treasuries ended the quarter at 84% of GDP, up from 41% at the conclusion of ’07. And let’s not overlook the government-sponsored enterprises (GSEs). Outstanding Agency Securities (debt and MBS) surpassed $9.0 TN for the first time during Q3, expanding $263 billion, or 3.0%, over the past year. Total Treasuries and Agency Securities ended the quarter at a record $26.439 TN (up $1.450TN y-o-y), or 128% of GDP. (more…)