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Economy in Brief

US Flow of Funds: Debt Growth Back Up Due To Financial Sector
by Tom Moeller December 6, 2007

Credit market debt outstanding owed by all sectors of the economy grew 11.0% (AR, 9.3% y/y) during the third quarter. The increase was the strongest since 4Q 2005 and reflected broad based, strong gains in the financial sector..

Credit market debt owed by the financial sector zoomed at a 16.5% (11.2% y/y) annual rate which was the strongest rate of gain since early 2001. Gains at commercial banks (41.0% y/y), bank holding companies (23.2 y/y), savings institutions (-8.8% y/y) and credit unions (68.9% y/y) were well into double or triple digit rates of growth.

Stable was consumer credit growth which held at an 8.2% (7.8% y/y) quarterly rate of growth. Households' obligations on home mortgages grew 7.3% (8.0% y/y) which was half the growth rates seen a few years back. Conversely, credit card debt rose sharply (5.3% y/y) and the quarterly growth rate of 10.3% was the quickest since 2004. Bank loans also surged.

The net worth of the US household sector last quarter improved to a record $58.604 trillion as the dollar gain in household sector assets, which totaled 72.8 trillion, outweighed by four times the growth of liabilities which total $14.1 trillion.

Total assets of households and nonprofit organizations grew at a 4.9% rate (7.4 y/y). Households' ownership of real estate assets was much reduced to a 2.1% growth rate (4.3% y/y), the slowest rate of gain since 1993. That, however, was offset by a 6.4% (9.5% y/y) gain in financial assets led by a one-quarter (7.2% y/y) rise in the value of credit market instruments and a rise in the value of mutual fund share holdings (21.8% y/y). The value of money market shares rose by one third as assets were shifted to a safe haven (24.5% y/y).

Flow of Funds (Y/Y Chg.) % of Total 3Q'07 2Q'07 2006 2005 2004
Total Credit Market Debt Outstanding -- 9.3% 8.7% 9.5% 8.8% 9.2%
    Federal Government 12% 4.3% 3.0% 3.9% 7.0% 9.0%
    Households 27% 7.8% 8.2% 10.3% 10.7% 11.5%
    Nonfinancial Corporate Business 14% 11.0% 9.8% 8.4% 5.1% 3.5%
  Financial Sectors 32% 11.2% 8.9% 10.1% 8.5% 9.2%
Net Worth: Households & Nonprofit Organizations (Trillions) -- $58.604 $57.979 $56.117 $52.061 $48.164
  Tangible Assets: Households -- $27.484 $27.325 $26.671 $25.019 $22.464
   Financial Assets: Households -- $45.277 $44.579 $42.880 $39.203 $36.747
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