Consumer debt shrinking, boosting economy

Heavy consumer debt, a big negative in the struggling U.S. economy, is easing, economists say, offering hope for future expansion.

A Bloomberg report says that according to data from the Federal Reserve, household debt as a share of disposable income shrank from 134 percent just before the recession struck in 2007 to 113 percent in the second quarter of this year.

Further, the delinquency rate on credit cards is at its lowest point since the end of 2008.

Mark Zandi, chief economist at Moody’s Analytics, said, “Credit use should soon go from being a significant headwind to the economy to a tailwind.” He added that, “The household deleveraging process is largely over.”

Consumers have benefited from a rising stock market and from increases in home prices in some markets. Household net worth rose to 527 percent of income in the second quarter from 477 percent in the first quarter of 2009.

Households have also reduced the length of their debt, thanks to owners refinancing to shorter terms.

8 comments Add your comment

Road Scholar

October 16th, 2012
10:08 am

And the economy continues to improve!

Jack Welch

October 16th, 2012
12:25 pm

This is all part of the vast left-wing conspiracy to get Obama reelected! Mark Zandi was paid off by the Chicago boys! Listen to me! I’m still relevant! Really, I am!

Independent voter

October 16th, 2012
3:22 pm

113 % debt to GDP is good ???

Independent voter

October 16th, 2012
3:27 pm

hey Jack.. Chicago is several Billion $$$$$ in debt and will ask for a Fed. bailout so their public employees labor union city workers can have a lavish early retirement… should we pay for that ???

Progress

October 17th, 2012
7:30 am

One more indicator that the economy is improving. Unemployment is down, new jobless claims are down, housing is up, and now consumer debt is down. But of course, Republicans are still rooting for America to fail when we’re just climbing out of the mess they made.

EJ Moosa

October 17th, 2012
10:46 am

“One more indicator that the economy is improving.”

It only appears to be improving as people have declared bankruptcy, removing the debt from what they owe.

And for every dollar in debt dismissed, it’s one dollar in profits removed from the private sector. That costs jobs.

[...] Consumer debt shrinking, boosting economyAtlanta Journal Constitution (blog)Mark Zandi, chief economist at Moody’s Analytics, said, “Credit use should soon go from being a significant headwind to the economy to a tailwind.” He added that, “The household deleveraging process is largely over.” Consumers have benefited from a …Economy buoyed by consumers accommodating lower deficitNorthJersey.comHousehold Debt At Lowest Level Since 2006, Consumers More Comfortable …Huffington Postall 10 news articles » [...]

Alessandro Machi

October 17th, 2012
4:34 pm

Credit Cards with 2% monthly minimum payments are an intentionally defective product. They are no different than a pack of cigarettes, except that cigarettes come with warnings on them.

Every american has been denied the opportunity to have REASONABLY PRICED debt suspension insurance because of the unregulated and SEVERELY OVERPRICED credit card protection insurance program.

Unregulated Credit Card Protection insurance was such a huge profit maker for the credit card companies that it took the consumer financial protection bureau levying close to a billion dollars in fines for the credit card companies to stop offering the fraudulent, overpriced, unregulated credit card protection insurance program.

However, for the past 15 years, overpriced credit card protection insurance THWARTED all consumers from having the opportunity to be responsible regarding their debts. Perhaps 90% of all credit card defaults need to be vacated because of the credit protection insurance program fraud.

-Alessandro Machi