American households took on $241 billion in additional debt in the fourth quarter of last year, signaling the end of an extended period of hunkering down. Total household debt increased 2.1 percent, the largest quarterly increase since before the recession, according to a new report from the Federal Reserve Bank of New York.
“After a long period of deleveraging, households are borrowing again,” said Wilbert van der Klaauw, senior vice president and economist at the New York Fed.
Asked if the report was good news or bad news for the economy, van der Klaauw gave a little laugh. “Good or bad, it’s hard to say,” he said. “In a steady state you would expect, in nominal terms, household debt to grow.”
It was a measured statement that glossed over the complexity of the report. While a willingness to borrow can be an indication that households are more confident in their economic futures, it can also indicate that they are struggling to maintain spending levels in the face of high unemployment and stagnant wages.
Some kinds of debt, like car loans and mortgages, may be a positive sign that people are investing in the future. Other kinds, like student loan debt, can put a damper on the economy by suppressing discretionary spending for years.
There is rising concern that student debt is contributing to a slowdown in the creation of new households, keeping young people living with their parents and 30-somethings from becoming homeowners.
The debt increase in the fourth quarter was driven primarily by new mortgages, which grew by $152 billion; car loans, which grew by $18 billion; and student loans, which grew by $53 billion and had the biggest percent increase at 5.2 percent. — The New York Times
WASHINGTON (AP) — U.S. home construction fell in January for a second month but the weakness in both months reflected severe winter weather in many parts of the country. The expectation is that housing will deliver another year of solid gains, helped by an improving economy.
Builders started work at a seasonally adjusted annual rate of 880,000, down 16 percent from December, the Commerce Department reported Wednesday. In December, construction had fallen 4.8 percent. The declines in both months were blamed largely on the weather.
For all of 2013, housing construction rose 17.7 percent to 976,000 units, the best showing since 2007. — AP
The cost of producing goods and services in the United States rose slightly in January, with higher food prices partly offset by cheaper gas. Overall, inflation remains mild.
The Labor Department said Wednesday that the producer price index, which tracks prices before they reach consumers, rose 0.2 percent in January. In the past year, producer prices have risen just 1.2 percent, below the Federal Reserve’s preferred target rate. Excluding the cost of food, energy and markups by wholesalers and retailers, so-called core prices ticked up just 0.1 percent.
Producer prices remain “rather modest, a sign that underlying inflationary pressures are very modest,” Annalisa Piazza, an analyst at Newedge Strategy, said in a note to clients.
January’s producer prices are the first to be compiled since the government revamped its index to make it more comprehensive. Producer prices now include services and construction. Before last month, they index tracked only goods. — AP