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Where Are Households in the Deleveraging Cycle?, No. 12-01

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Where Are Households in the Deleveraging Cycle?, No. 12-01

DATE: January 2012

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ABSTRACT: The ratio of household debt to disposable personal income fell rapidly during the recession of 2007-09 as consumers defaulted on loans, paid down debt, and took out fewer loans. According to some economists, this household debt reduction—"deleveraging"—has constrained consumer spending, contributing to a longer, deeper recession and a slower recovery. As households strengthen their balance sheets, their ability to take on new debt to finance consumption is improving. But household debt remains elevated by historical standards, and other determinants of consumer spending remain weak.

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Bauer, R. Andrew , Nash, Betty Joyce and Federal Reserve Bank of Richmond. "Where Are Households in the Deleveraging Cycle?, No. 12-01," Economic Brief (January 2012). https://fraser.stlouisfed.org/title/6034/item/583896, accessed on June 6, 2023.

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