A hopeful sign for the economy

There are not many pictures that represent a truly positive outlook for the economy, which is to be expected coming out of a major crisis event like we saw in the U.S. and much of the world. However, if we believe that adjustments were necessary to fix what was wrong, then here is a hopeful picture.

debtservice

 

Households reduced debt service as a percentage of disposable income by over 3.5% since the financial crisis started. During this time the average quarterly percentage change in disposable income was only 1.1%, so there was a real reduction in the level of debt service. Households, like businesses, got their balance sheets and income statements bank in some semblance of order.

Reduced debt service implies more income for consumption or saving, as well as taking on other debt to further household goals. More spending will likely require a broader sense of recovery in the U.S. economy. What is necessary for that to occur? It is not completely clear at this time.

Leave a Reply