Recession in 2017? US Household Debt Will Break 2008 Records This Year

While the stock market continues to set records, U.S. households are carrying levels of debt that haven't been seen since just before the Great Recession. Household debt reached nearly $12.58 trillion in the fourth quarter of 2016, the New York Federal Reserve said in a report released Friday. That's just $99 billion short of the all-time record, which was set in the third quarter of 2008. Experts expect U.S. household debt will break that mark in the coming year.

Debt increased 1.8 percent, or $226 billion, last quarter. Every type of debt increased, the report said, including mortgage debt, auto loan balances and student loan balances. Credit card balances grew the most, at 4.3 percent.

While Americans have acquired a debt burden similar to the burden they had before the Great Recession, the type of debt Americans are now saddled with is now different.

"Its composition today is vastly different as the growth in balances has been driven by non-housing debt," said Wilbert van der Klaauw, senior vice president at the New York Fed, in a statement. "Since reaching a trough in mid-2013, the rebound in household debt has been led by student debt and auto debt, with only sluggish growth in mortgage debt."

While nobody likes to take on debt, an increase in debt isn't necessarily a bad thing for American households. Growing debt could be indicative of the optimism Americans have in the economy, as they have faith they will be able to pay back the money they borrow. Delinquency rates stayed relatively stable, indicating that the growing debt wasn't fueling an inability to pay back borrowed funds.

On Thursday, the Dow Jones Industrial Average hit a sixth straight day of record highs. Wall Street has posted big gains in 2017, propelled by President Donald Trump's promises to cut corporate taxes and roll back regulations. Other economic data released Wednesday showed that retail sales, inflation, and manufacturing activity beat analyst expectations in January.