Increases in auto, credit card and student loans are pressuring consumers to restrain spending. Total household debt leaped from 65% of after-tax income in the early 1980s to 133% in 2007. Mortgage repayments and write-offs have reduced it, but only to 99%. It will probably return to its long-run norm, especially as the baby boomer generation is forced to save if it doesn’t want to keep working long after retirement age.
Look for weakness in employment and consumer spending in the coming months. That will seal the case for a recession.
This article was provided by Bloomberg News.