The flow of funds report published today by the Federal Reserve Bank shows that U.S. household debt fell at an annual rate of 2% in the third quarter of 2012, following a second-quarter jump of 1.2%, which was the largest increase since the first quarter of 2008. Non-financial sector debt rose by a seasonally adjusted annual rate of 4.5% in the third quarter, roughly in line with the increase in the previous quarter.
State and local government debt was essentially flat after rising by 0.8% in the second quarter. Federal debt rose by 6.25% in the quarter, well below last quarter’s 10.9% increase and the smallest increase since 2007.
Total U.S. household debt dropped slightly from the second quarter to $12.9 trillion. Total borrowing by U.S. households fell by $261.7 billion in the third quarter, after rising by nearly $161 billion in the previous quarter.
Household net worth rose by…
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