March 8, 2012 / 5:48 PM / 7 years ago

Household debt rises for first time in 3-1/2 years

WASHINGTON (Reuters) - Household debt rose for the first time in three and a half years during the fourth quarter, suggesting Americans were more comfortable borrowing money and potentially laying the groundwork for higher consumer spending.

The data released on Thursday by the Federal Reserve also showed household wealth increasing by $1.2 trillion, which could also support spending.

The report showed the ratio of U.S. household debt to after-tax income fell in the fourth quarter to the lowest level since 2004.

Total household liabilities were 117.5 percent of disposable income during the October-December period, down from 118.2 percent in the previous quarter, according to Reuters’ calculations based on the Fed’s “Flow of Funds” report.

Consumer credit swelled by 6.9 percent during the October-December period. Households continued to shed mortgage debt, which makes up the majority of their liabilities and declined at a 1.5 percent annual rate. The pace of the decline in mortgage debt was the slowest in two years.

A jump in the value of financial assets pushed household net worth higher to $58.455 trillion, even though a fall in the value of real estate tempered the gains.

Households have struggled to rebuild their net worth after the country’s housing bubble popped and triggered the 2007-2009 recession.

Non-financial corporate businesses held $2.233 trillion in liquid assets, such as cash, in the fourth quarter, up from $2.120 trillion in the previous quarter, the data showed. The growing mountain of cash suggests companies are still leery about investing.

Reporting by Jason Lange; Editing by Andrea Ricci

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