Saturday, December 21, 2013

Is The Period Of Household Debt Deleveraging Over?

Economies typically recover slowly from recessions that are associated with a financial crisis.  This graph shows that household consumption has been limited by the need to pay down debt that was accumulated prior to the recession.  It would appear that households have effectively paid down their debt and that they are beginning to take on new debt.  The housing market has strengthened and the purchase of durable goods like automobiles which are typically debt financed has rebounded.  That might explain the strong results in Q3.  GDP growth in the US came in unexpectedly at over 4%.

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