Good News: Consumers Start To Pay Off Debts

Amazingly, for the first time since they’ve started collecting the data, household debt actually fell

WSJ: New Federal Reserve data revealed that U.S. households paid down debt for the first time since the central bank started collecting the information in 1952. While a positive longer-term trend, the higher savings rate means that consumers are spending less. That is a punishing turn for an economy in which consumer spending accounts for 70% of gross domestic product

The Fed’s quarterly flow-of-funds report, the most comprehensive snapshot of the household sector available, showed that household debt contracted at a 0.8% rate, the first drop on record.

We’ve been spending money like crazy for decades, so there’s no time like the present to start repairing our household balance sheets — saving up and paying the piper. Sure, it’s not great news for retailers, many of whom will go out of business, but a “punishing turn” it’s not.

As you can see in the chart, via The Journal, that little tick down at the end is just the beginning of what will probably be a long process.


See Also:
Reminder: Not Shopping Is Good For The Economy, Too