– The incoming weekly data shows continued strength in consumer spending, and outlook surveys show continued strength ahead (Charts 1 to 3).
– Credit card debt as a share of disposable income is below pre-pandemic levels (Chart 4).
– The effective interest rate on mortgage debt outstanding is only 4% (Chart 5).
– Households are reporting that it is easier to get access to credit, and banks are more willing to lend to consumers (Charts 6 and 7).
– HELOC balances are rising, and savings are rising for most households across the income distribution (Charts 8 and 9).
– Debt to disposable income is declining, and US households are in much better shape than households in Canada and Australia (Chart 10).
The bottom line is that incomes are high, stock prices are high, home prices are high, debt levels are low, interest rate sensitivity is low, and banks are more willing to lend to households.
There are significant upside risks to US growth, inflation, and interest rates as we enter 2025.
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