US consumer debt hit a record $14.3 trillion in the first quarter

• Total household debt increased 1.1% to $14.3 trillion through March 2020, according to a Tuesday report from the New York Federal Reserve.
• The total balance is now $1.6 trillion higher in nominal terms than the previous record of $12.68 trillion in the third quarter of 2008.
• Credit card balances declined by $34 billion in the quarter, a notably larger drop from the same period last year. Other forms of debt fell by $5 billion in the quarter.
• But it may be too early to attribute the drop to the coronavirus pandemic, the Fed said.
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US consumer debt ballooned to a record in the first quarter, before the worst months of the coronavirus pandemic.

Total household debt increased 1.1% to $14.3 trillion through March of 2020, according to a Tuesday report from the New York Federal Reserve. The total balance is now $1.6 trillion higher in nominal terms than the previous record of $12.68 trillion in the third quarter of 2008.

Mortgage balances, the largest component of the report, rose to $9.71 trillion in the first quarter, a jump of $156 billion. Non-housing debt balances were mostly flat, as the $27 billion increase in student loans and the $15 billion increase in auto loans was largely offset by a decline in credit card balances and other forms of debt, according to the Fed.

Credit card balances declined by $34 billion in the quarter, a notably larger drop from the same period last year. Other forms of debt fell by $5 billion in the same period.

"It is critical to note that the latest report reflects a time when many of the economic effects of the COVID-19 pandemic were only starting to be felt," said Andrew Haughwout, senior vice president at the New York Fed.

He continued: "We do see a larger-than-expected decline in credit card balances based on past seasonal patterns, but it is too soon to confidently assess its connection to the pandemic."

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In the last two weeks of March, the US consumer was hit hard when most of the country went into strict lockdown to curb the spread of COVID-19. Nonessential business was banned, record job losses began, and consumers were asked to practice social distancing by staying home. In March, US consumer spending dropped by a record 7.5% amid the pandemic.

It's likely that this shutdown of the economy would be reflected in the report as lower consumer spending and thus lower credit card balances. Still, the Fed cautioned that the last two weeks of March may not be reflected in the first quarter data, as individual credit accounts are typically updated monthly.

The next report is due at the end of the second quarter, and will include April to July 2020. The report is based on data from the New York Fed's Consumer Credit Panel, a nationally representative sample of individual and household-level debt and credit records drawn from anonymized Equifax credit data.

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