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Economy in Brief

1Q Debt Growth Fastest Y/Y Since 1999
by Tom Moeller June 9, 2006

Growth in total credit market debt outstanding rose 10.2% (AR) last quarter. That was a modest slowdown from the 12.1% advance during 4Q but it was enough to lift the y/y rate of growth to 9.7%, its fastest since 1999.

A jump in borrowing by the Federal government continued to lead debt growth with a 14.0% (AR) advance last quarter, its fastest in a year.

Moving in the other direction, growth in household sector borrowing slowed to 9.1%, its slowest quarterly gain in a year following the 11.7% surge during all of 2005.Home mortgage obligations grew at a still firm 12.6% rate (14.7% y/y) but consumer credit fell at a 5.1% (AR, +2.5% y/y). Bank loans jumped 12.3% (50.0% y/y).

Business borrowing picked up a bit and grew at an 8.3% annual rate (6.3% y/y).

Household sector asset values rose at a 10.8% annual rate (10.4% y/y) during 1Q driven by a 10.1% (14.6% y/y) gain in the value of real estate holdings. Financial asset values rose 11.6% (8.7% y/y) due to a 40.5% (AR, 20.3% y/y) rise in the value of mutual fund shares. The value of corporate equities held directly ticked up 0.7% (-1.6% y/y).

The net worth of the US household sector last quarter rose 2.7% (10.1% y/y) to a record $53.830 trillion. The gain lifted the ratio of net worth to income to 5.79 times.

Flow of Funds  % of Total 1Q 06 
(AR)
4Q 05
  (AR)
Y/Y 2005 2004 2003
Total Credit Market Debt Outstanding 10.2% 12.1% 9.7% 8.9% 8.5% 9.1%
    Federal Government 12% 14.0% 10.1% 6.5% 7.0% 9.0% 10.9%
    Households 28% 9.1% 13.2% 12.3% 11.7% 11.3% 11.4%
    Nonfinancial Corp. Business 14% 8.3% 6.1% 6.3% 5.5% 3.7% 2.3%
  Financial Sectors 32% 11.0% 14.9% 9.8% 8.3% 7.9% 10.0%
Net Worth: Households & Nonprofit Organizations (Trillions) -- $53.830 $52.430 -- $52.430 $48.470 $44.206
  Tangible Assets -- $26.223 $25.626 13.0% $25.626 $22.556 $20.036
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