Wednesday, August 18, 2010
The Federal Reserve Bank of New York has started a great new quarterly report with a ton of information on household credit status in the U.S. This will help us to assess the process of deleveraging as it continues. The data is based on a random sample of credit reports from Equifax, one of the three big credit reporting agencies.
The most interesting graph is this one for overall household debt and it's composition:
from the BEA as this is what we really care about - how big is the debt relative to the income potentially available to service it.
The blue line is the data, and the red line is a rough extrapolation of the pace of deleveraging of the last eighteen months. At its peak, total household debt was 115% of DPI, and it's down to 103% as of Q2 of 2010. At this pace, it will be paid down to a reasonable level in less than a decade (obviously many things could happen to change the pace of deleveraging, so this should be seen as a scenario, not a forecast).
Under the circumstances, that seems like a decent pace of progress.