Don’t forget about consumer debt
It’s not just corporate debt that is out of control. Consumer debt is, too.
It’s not just corporate debt that is worrying market watchers. Bloomberg News reports that a “global consumer default wave” is under way too. The trend is most apparent in China, where an estimated eight million people lost their jobs in February. Overdue credit-card debt is up 50% last month on a year earlier. “Few places have seen a bigger jump in consumer borrowing in recent years than China,” where a housing boom and new online lending platforms drove household debt to a record 55% of GDP last year.
The Institute of International Finance says that globally households are carrying $12trn more debt than before the 2008 crisis. European households are particularly vulnerable. Household debt as a percentage of net disposable income sits at more than 200% in Denmark, the Netherlands and Norway. British household debt sits at 141% on this measure, while American households, which have deleveraged in the years since the great recession, score a comparatively sober 105%.
UK consumer debt levels have risen for seven years, says Laura Suter of AJ Bell. People took on an extra £900m of non-mortgage debt in February.
The last time British consumers “repaid more than we took out” was October 2012. One in eight British adults have no savings at all. Expect a new debt boom now as locked-down workers turn to credit cards and overdrafts to tide themselves over.