Household debt indicates confidence improving

Good news for the US economy is that household credit has started to grow, recovering above zero after a protracted contraction. Not only does this indicate a recovery in consumer confidence, but it will fuel additional expenditure and stimulate income growth.

US Household Credit Growth

The ratio of household debt to personal disposable income continues to contract, indicating that debt is growing at a slower rate than disposable income. This is likely to continue for some time as households recover from the credit binge leading up to the GFC, but is a healthy sign provided credit growth remains positive.

Household Debt over Disposable Personal Income

Declining corporate bond spreads and historically low readings on the CBOE Volatility Index (VIX) suggest a healthy bull market ahead.

CBOE Volatility Index


Australian household debt remains elevated at 150% of disposable income, almost 50% higher than US levels.

Australian Household Debt to Disposable Personal Income

While household debt levels will need to be addressed in the long-term, declining corporate bond spreads indicate there is no immediate cause for alarm.

Australian Bond Spreads

All who are able, may gain virtue by study and care, for it is better to be happy by the action of nature than by chance. To entrust to chance what is most important would be defective reasoning.
~ Aristotle