While the narrower spreads in Europe created the unintended consequence of perversely reducing the urgency for banks to delever their over-stuffed balance sheets (and in fact in many cases likely make them worse thanks to the ECB), the US Household continues to (sensibly) slowly but surely reduce their leverage. As today's Bloomberg Brief notes though, the slow pace of deleveraging will continue to weigh on growth over the next few years - even as they have drawn down debt as a percentage of personal income from its peak in June 2009 at 114.76% to 101.1% at the end of 2012. There is a long way to go to the apparent Maginot line of supposedly sustainable 90% and with wage growth stagnant, the bulk will come from debt reduction in true balance-sheet-recession style - putting still more pressure on a perniciously polarized government to do anything about it.
While progress has been made, there is still a long way to go for the US Household to get to supposedly sustainable levels of debt to personal income...
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...and it seems there is no interest in ramping up the spending that we do not have as credit card accounts remain dramatically lower than pre-debt super-cycle peaks...
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...and while any deleveraging is good deleveraging, write-downs and defaults seem top of the list and the stability of recent months in 90-day delinquencies does not suggest 'improvement' as much as a pause in the pain...
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Chart: Bloomberg