American Consumers Took on $28B in New Debt: What Does That Mean?

The word “debt” has a lot of negative connotations. But consumer debt isn’t always a bad thing. In fact, in broader terms, it can sometimes signal confidence in the economy, and people’s own sense about what their prospects are for the year and beyond.

With that in mind, borrowing on credit reached a new high recently.  Consumers took on $28 billion of new debt in November, 2017 according to recent reports.

• That represents an increase of 8.8% compared to October, 2017 according to the Associated Press.
• The increase is the largest since November, 2001 according to reports.
• Total consumer borrowing in the U.S. was $3.83 trillion for the month.

What’s consumer credit?

Consumer credit is essentially any money an individual can borrow quickly for goods and services, and generally with the intention of spending right away. It’s considered a building block for a strong economy.

Credit cards, also known as revolving credit, are one kind. Car loans are another. And so are non-installment loans, which require a lump sum repayment all at once. (Mortgages, and other loans for real estate are not considered consumer credit.)

Consumers took on $28 billion of new debt in November 2017.

The Good

Increased borrowing can be a sign of consumer confidence, according to experts.

“Improved [consumer] sentiment helped” drive the consumer credit increases, analyst T.J. Connelly, head of research at Contingent Macro Advisors, told the Wall Street Journal on Tuesday.

In fact, consumer confidence also reached a 17-year high in November, according to something called the Conference Board, a business membership research group, which regularly takes the pulse of consumer attitudes about the economy in monthly surveys.

There are plenty of reasons for a positive outlook: Unemployment is at a multi-decade low and job hiring is strong, according to reports; the stock market is booming, and normally worrisome indicators like inflation, which increases the cost of living, have been kept at bay.

The not-so-good

It’s also important to keep in mind that total household debt in the U.S. is at record levels. That’s not necessarily a good sign.

Total consumer debt reached a new record at the end of October, when consumers collectively owed $12.96 trillion. That’s about $280 billion more than they owed the last time their debt reached a peak, prior to the financial crisis in third quarter of 2008, according to the Federal Reserve Bank of New York.

Some of the biggest reasons for increased household debt include card debt, student loan debt, and auto loan debt, according to reports.