Auto loans hit record high and some other consumer debt rising, New York Fed says

• Auto loan originations hit $211 billion in Q2, a nominal but not inflation-adjusted record, with previous pandemic-era peaks around $200 billion in 2021
• Home equity balances rose $19 billion as part of a four-year trend of older homeowners avoiding high mortgage refinancing rates
• Credit card delinquency rates stabilized at around 7% of balances flowing into delinquency quarterly, while consumer spending remained solid with a 4.3% increase in July card spending (excluding gas)

SUMMARY

U.S. auto loan originations reached a nominal record of $211 billion in Q2 2024, though this figure is not adjusted for inflation, according to the New York Fed's latest household debt and credit report released August 11.

Key Figures:

• Overall consumer debt declined slightly to $18.8 trillion in Q2, though this decrease was due to mortgage data reporting changes
• Home equity balances rose $19 billion, continuing a four-year trend as older homeowners avoid high mortgage refinancing rates
• Overall delinquency rate fell to 4.7% from 4.8% in the prior quarter
• Credit card delinquency rates stabilized at approximately 7% of balances

Market Context:

The auto loan record follows pandemic-era purchasing surges in 2021 that also approached $200 billion quarterly and drove up vehicle prices. Consumer spending remains robust despite inflation outpacing income growth, with personal consumption expenditures jumping 3.2% in Q2.

Bank of America Institute analysis showed July credit card spending (excluding gas) rose 4.3%, with evidence of spending convergence across income groups, suggesting lessening "K-shaped" economic dynamics.

Implications:

The data presents a puzzle for Federal Reserve policymakers monitoring when price pressures exceeding wage growth will translate into consumer stress. However, household balance sheets appear resilient, with delinquency rates declining and credit card delinquencies stabilizing rather than accelerating. The sustained consumer spending contributed to keeping GDP growth at 1.5% annually despite slowing from the prior quarter's 2.1%.

The report suggests consumer financial health remains solid despite cost-of-living pressures, though economists continue watching for potential stress signals.