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Consumer Debt Drops in Third Quarter of 2012

November 15, 2012

While economists scour the immense amount of data generated by economic indicators to see if the nation is finally on its way to recovery, they may have a new tool in their arsenal: consumer debt would appear to be dropping, albeit slowly.

Overall consumer debt levels fell $256 billion in the third quarter of 2012 versus the same period a year ago, according to new Credit Trends data released by Equifax on November 8, 2012. However, the 2.28 percent year-over-year decline is the slowest rate of decline since the second quarter of 2009, showing that some of the caution may be starting to lift.

Previous to this drop, consumer debt had been on the rise.

U.S. consumers currently owe $11 trillion across all types of debt, with mortgage debt accounting for a little more than three-quarters of that amount. Mortgage debt fell 3.4 percent in the third quarter, compared to the same period a year ago. 

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Nonmortgage consumer debt actually increased 0.7 percent, according to ACA International.

While the average debt may be down nationwide, the news varies by region. Among the largest 25 metro areas, total consumer debt continued to decline in all but three markets versus the same time a year ago. In Houston-Galveston-Brazoria, debt climbed 1.37 percent.

In Pittsburgh, it increased 1.05 percent. And in Dallas-Fort Worth, debt grew 0.08 percent. The markets where debt declined at the fastest rates are also some of the areas hit hardest by the housing bust and the recession, says the ACA.

The largest declines in consumer debt were in the Las Vegas, Miami-Fort Lauderdale, Sacramento-Yolo and Phoenix-Mesa markets.

The falling debt may be attributed in part to debt levels for mortgages, which are falling all over the nation. By contrast, however, consumer debt levels for auto loans may be on the rise, indicating that as the nation emerges from recession, consumers are slowly starting to buy cars at a brisker rate, replacing older cars they held onto during the worst of the recession. 

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Edited by Braden Becker

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