Growth of Domestic Nonfinancial Business Debt

A recent report by the Federal Reserve focuses on nonfinancial business debt. This measure excludes debt owed by commercial banks, finance companies and other financial institutions. The data show that total debt of households rose at an annual rate of 10.0 percent in the first quarter of 2003, down slightly from the peak annualized growth rate of 10.9 percent in the fourth quarter of 2002. From 1993 through 1996, the annual growth rate of household debt exceeded that of non-financial businesses. The growth rate of business debt dropped sharply in 2001and has continued to lag behind the annual growth rates of consumer borrowing. In the first quarter of 2003, the annualized growth rate of business borrowing was 3.7 percent vs. an increase of 10.0 percent in consumer borrowing. In general, the annual growth rates of household debt were more stable than in the case of borrowings by state and local governments. From 1993 through 1996, these government entities significantly reduced their outstanding debt. However, they made up for that frugality by increasing their borrowings at an annualized rate of 15 percent in the fourth quarter of 2002.

Source: Federal Reserve Statistical Release, June 5, 2003.