Don’t forget about consumer debt

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.