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  • Writer's pictureBob Brooks

How Close Are We To A Recession?

If you are wondering how close we are to a real recession, just look at the consumer credit card numbers. WalletHub just released its latest Household Debt Report. This evaluates how U.S. consumers are faring so far. Here are some of the results:

Consumers added a total of $398 billion in new debt during Q4 2022 – the fourth highest amount for a fourth quarter in the past 20 years and nearly 4.5X larger than the fourth quarter in 2021.

Total household debt grew to $17 trillion in 2022 roughly $1 trillion below WalletHub’s projected breaking point, based on debt levels during the Great Recession. WalletHub has identified the point where debt breaks the consumer. You don’t want to get too close to that point. A trillion dollars seems far away when in reality, we could reach that in no time.

The average household owed a total of $142,680 at the end of 2022, only $11,710 below WalletHub’s projected breaking point for household finances.

In Q4 2022, debt from home equity lines of credit (HELOC) increased by $14 billion. This is a worrisome statistic. Before the last two quarters, this number went down for 22 consecutive quarters in a row. In other words, consumers were paying down the debt. In the last two quarters in a row, we have seen increases, which means people are borrowing more.

When do we have a problem? When people are forced to use credit card debt to fund everyday expenses. Said another way, when consumers start using credit cards as a replacement for real money.

Unless you can paint a picture where consumers are just spending money on “wants” versus “needs,” I think we are dangerously close to a recession.

If you have further questions for Bob, please visit the Ask Bob page on the website and Bob will get back to you.


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