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Households on a spending spree as wealth, borrowings grow

US households are spending more as is evident from the solid holiday season and the continuing buoyancy of the retail market.

Key economic indicators Thursday revealed that families’ net worth grew significantly in the final months of last year, while their borrowings increased at the fastest pace in more than a decade.

Household debt, the combined debt of all family members, increased at an annual rate of 5.2% in the fourth quarter, following a 3.5% growth in the preceding quarter. One single factor that could have raised the level of debt is vehicle loans, which witnessed a spurt following the widespread damage caused by bad weather. A good thing about the rising consumer credit and mortgage borrowing is that they fuel people’s propensity to spend.

Picture Courtesy: Max Pixel

Meanwhile, the robust gains made by the S&P 500 index and the stock market, in general, pushed up the net worth of U.S residents to $98.7 trillion in the fourth quarter, which is an all-time high.

The fact that overall spending remained muted despite consistent wealth growth ever since the economy emerged from the 2008 crisis indicates that Americans have been cautious while spending so far. The upbeat mood is likely to prompt people to spend more, a trend that would add steam to the economic recovery.

Meanwhile, data published by the Labor Department showed more people claimed unemployment benefit, marking a departure from the preceding week’s report that showed jobless claims dropped to a 48-week low. In the most recent week, jobless claims rose by 21,000.

Earlier reports from the department had revealed a decline in unemployment rate and strong wage growth.

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