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