The Q1 flow of funds report from the Fed is out and the report card is in on the US consumer. Due to a rise in disposable income from Q4 (likely due to the sharp drop in gasoline prices and also tax refunds) and a drop in consumer credit (mortgage debt was flat), household debt (consumer credit + home mortgages) as a % of disposable income fell to 120% from 123% in Q4 ’08 and is at the lowest level since 2004 but remains well above the year end 2001 level of 96% and 83% range in 1995. Owners equity in their home fell to another record low to 41.4% from 42.9% in Q4. It first fell below 50% in Q4 ’07 and was 57.5% 10 years ago. Household wealth in their homes fell $448b from Q4 and is down by $4 trillion from the ’06 high. Bottom line, the data reflects the consumer deleveraging that is still ahead of us. I highlight the consumer balance sheet b/c of its huge contribution to GDP.

Category: MacroNotes

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