The Deleveraging American Consumer?

click for ginormous graphic
Source: WSJ

I love this giant graphic from this morning’s WSJ — it gives us the 30,000 foot view of consumer debt here in the USA.

Despite low rates — or is it because of them? — American consumers have seen their debt loads fall to the lowest levels in 6 years. Now they are starting to open those wallets up again, and spend.

But is this a general improvement or a specific response to unique circumstances? While many mortgages and home equity loans have been refinanced at ultra low rates, is that giving consumer space to shop?

For example, Automobile loans have ticked up¬†$20 billion in Q2 — but the US auto fleet is the oldest its ever been. Perhaps consumers are expecting higher interest rates, and are making belated car purchases. (Outside of autos, however, consumer debt fell $78 billion).


We cannot yet tell if this is part of a broader trend, or if it is a series of specific modest improvements. Note that the Great Depression created an entire generation of debt averse savers.

I wonder what the Lesser Depression has done to Consumers’ collective psyches . . .


UPDATE: August 15, 2013 8:30am
Wal-Mart (WMT) quarterly earnings are out — and they disappoint. Sales are $116.2B, weaker than $118.09B estimates; the company cuts fiscal year estimates. Traffic at Wal-Mart is now down 2 quarters in a row. Though Q2 profit rose 1.3%, to $4.07 billion ($1.24 per share), that was a penny shy of estimates. Net sales rose 2.4% to $116.2 billion. Revenue at stores open at least a year at Wal-Mart’s namesake business fell 0.3 percent. That’s considered an important measure of a retailer’s performance.

Is the consumer trading down? Or is the low end consumer broke?


Confident Consumers Step Up Their Borrowing
WSJ, August 14, 2013

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