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Pace of U.S. debt slows in quarter

By Rex Nutting,
Sept. 16, 2004

WASHINGTON (CBS.MW) -- The growth in debt in the United States slowed to a 7.7 percent annual rate in the second quarter, from 9.1 percent in the first quarter and 8.1 percent for all of 2003, the Federal Reserve reported Thursday.

Total debt increased to $23.3 trillion from $22.8 trillion in the first quarter.

Most of the new debt was taken on by households and the federal government. Corporate and state and local government debt grew at a slower pace.

Corporations failed to raise any net capital in the markets for the first time since the third quarter of 2002.

Debt of households grew 9.5 percent in the second quarter to $9.7 trillion, compared with 11.3 percent annualized growth in the first quarter and 10.2 percent growth in 2003.

Federal debt increased at a 10.7 percent annual pace to $4.3 trillion after growing 12 percent in the first quarter and 10.9 percent in 2003.

Debt of state and local governments grew at a 4.6 percent pace, less than half the 9.5 percent pace in the first quarter.

Corporate debt increased 4.4 percent, as net issuance of bonds was "negligible," the Fed said.

The net worth of households increased to $49.9 trillion from $49.3 trillion, the smallest increase in five quarters.

The value of households' real estate increased to $15.7 trillion from $15.3 trillion, while the value of financial assets increased to $35.2 trillion from $34.8 trillion. Liabilities increased to $10.1 trillion from $9.8 trillion.

The household sector sold $142.3 billion net in corporate equities during the quarter, down from sales of $296.4 billion in the first quarter.

Households added $766.5 billion in home mortgages, down from $875.5 billion. Household equity in real estate remained at 55 percent of total value.

The net worth of the corporate sector increased to $10.4 trillion from $10.1 trillion. Outstanding equities were worth $10.4 trillion as well.

Corporations bought back or retired $159.5 billion more in equities than they raised in the markets. Corporate bonds increased $5.7 billion after rising $114.2 billion in the first quarter. Net capital raised in the market was a negative $13.6 billion, the first negative since the first quarter of 2002.

All told, capital raised in the markets was negative for the first time since late 2002.

The ratio of debt to net worth in the corporate sector fell to 48.8 percent from 49.7 percent.




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