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Market Insights

Are the economy’s afterburners kicking in?

By David Russell

America’s recovery from 2008’s financial crisis was slow and steady for years. Economic data has recently been improving at a faster clip, and yesterday we got another potential sign of the afterburners kicking in. This time it was an old friend, consumer credit.

Borrowing shot up by $28 billion in November, according to the Federal Reserve. That not only blew past estimates but was also the biggest gain in 16 years. Credit cards led the charge.1

This is especially noteworthy because household borrowing has risen at less than a 5 percent annualized pace all decade. That’s way below the 6-12 percent readings common in the 1980s, 1990s, and 2000s.2

But wait, it could get even better. A different headline yesterday showed homeowner equity almost doubling in the last five years.3 Throwing in another recent projection for further increases in home prices,4 and we could have even more equity. How long before the old house-as-an-ATM money machine returns?


 

1. MarketWatch: Consumer borrowing grows at its fastest rate in 16 years. 1/8/18.

2. Federal Reserve: Z.1 Financial Accounts of the United States. 12/7/17.

3. CNBC: Homeowners are sitting on trillions in cash. 1/8/18.

4. CNBC: Home prices are set to soar in 2018. 1/2/18.

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