The Tenth District Consumer Credit Report shows that debt in the third quarter of 2018 declined modestly but delinquencies were mostly higher. Credit standing is a critical factor in the financial health of low- and moderate-income (LMI) individuals and families, as well as the LMI community at large. The report, released Dec. 21, is a biannual effort to share trends in consumer credit with community development and other Kansas City Fed stakeholders. The report covers debt levels by type of debt and credit delinquencies for the average or “typical” consumer in the District and in the nation for the third quarter of 2018. Some data are reported by District state. Each issue also considers a special topic, in this case, national trends in aggregate consumer debt.

Inflation-adjusted average consumer debt recently has begun to fall after several years of moderate but consistent increases. Average revolving debt has continued its secular decline since the Great Recession of 2007-09. In the third quarter, the average District consumer held $17,550 in consumer debt (total debt excluding first mortgages), which was down 1.1 percent from a year before. Nationally, average debt was $18,359. Average revolving debt, such as credit cards and home equity lines of credit, continued its multiyear decline in the District, falling in the third quarter to $5,047.

There is significant variation in inflation-adjusted average consumer debt across District states. Average outstanding consumer debt by District state ranged from $16,531 in Kansas to $20,120 in Colorado. Cost of living and disposable income together explain 81 percent of the variation in average consumer debt across District states.

Generally, delinquency rates have crept up over the past year, but mortgage delinquencies are an exception. In the Tenth District Consumer Credit Report, delinquency measures reflect the share of consumers with at least one account in the credit category (such as auto loans) who are 90 days or more past due on at least one account in that category.

In the third quarter, 14 percent of District consumers were delinquent on at least one credit account, similar to the national rate of 14.2 percent. The District delinquency rate on any account increased over the last two years from 13.6 percent in the third quarter of 2016. The nation experienced a similar pattern. The delinquency rate on any account is influenced most heavily by delinquencies on auto loans, bank cards, and consumer installment loans. Delinquency rates were higher in all of these categories.

While consumer credit delinquencies have edged up over the last year, mortgage delinquencies have continued to decline in the United States, the District overall, and each District state except Nebraska. The mortgage delinquency rate (total past due) in the District was 4.4 percent in October, down from 4.6 percent a year earlier. The U.S. mortgage delinquency rate fell over the year to 5.5 percent from 6.1 percent. Mortgage delinquencies varied significantly across the District.

Given recent concerns about the level of household debt, the special topic in this issue considered aggregate household debt levels in the United States and whether the current level should be of concern.

The analysis shows aggregate household debt is not yet at a level that raises critical concern. Inflation adjustment shows that growth in household debt is more subdued than the commonly reported nominal data suggest. Moreover, declines in debt-to-GDP and the financial obligation ratio for household debt suggest the capacity to pay of household debts is solid.

In summary, consumer debt has fallen in the past year after increasing for several years, but delinquencies are creeping up at a modest pace. The full report provides many additional details on these trends and an expansive special topic section.