Borrowing by Consumers Eases, But Credit-Card Balances Jump

The Wall Street Journal reports that American consumers' debt fell somewhat in September despite a rise in credit card debt. Yet debt burdens are rising as consumers rely more heavily on morgaging their homes and reduce their exposure by pulling back on credit card debt. The Wall Strret Journal reports, "As of the second quarter, mortgage payments had reached 11.6% of disposable income, the highest level since at least 1980. Consumer-debt payments had fallen to 6.5% of disposable income, the lowest level since late 2000."

As houses become more difficult to sell in the previously hot real estate markets, less mortgage financing will bleed through to consumer spending. A slowdown in both consumer spending and new housing is translating into slower U.S. growth. Will the housing bubble burst into a recession? It is too early to make that call.