The worst may be over for U.S. households, but that doesn’t mean that robust growth is imminent either, says BCA Research.
In a research note, the firm says that, “the good news for U.S. households is that the most intense phase of the deleveraging cycle is over. The bad news is that hopes that the deleveraging cycle will come to an end within the next couple of years are unduly optimistic.”
“While household deleveraging will be less of a drag,” it says, “economic growth likely will stay subdued for the foreseeable future.”
BCA points out that there is still some work to be done in terms of deleveraging. For example, housing debt remains at about 60% of the value of the residential housing stock, which is still well above the pre-bubble level of 40%, it points out. And, it says, the pace of public sector deleveraging is likely to intensify, especially at the federal level.
Additionally, BCA says that the current household saving rate “is still below what one would expect given the present ratio of household net worth-to-disposable income. This means households will continue to try to save more, which will likely only serve to depress spending and aggregate incomes.”