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%.

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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.

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Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.