Thursday, May 10, 2007

There May Be Room For Continued US Consumption Increases

From the WSJ:

Personal debt has reached a record $2.6 trillion. According to the Organization for Economic Cooperation and Development, U.K. household debt as a percentage of annual disposable income hit 159% in 2005 -- the last year for which data is available -- compared with 135% in the U.S.

The article expresses concerns about England's consumers ability yo keep spending when their household debt levels are at 159% of disposable income.

I raise the point as one of comparison to the US. I have expressed concern about US household debt levels for some time. However, there is no magic economic line where where household debt prevents an increase in consumption expenditures. It's really just a best guess scenario.

That being said, if England's consumers can continue spending at a household debt/disposable income level of 159%, than US consumers obviously can continue to spend at 135% household debt/disposable income ratio.

The article also has this graph which shows the hh debt/disposable income ratio in other countries. The US is far from alone.

Photo Sharing and Video Hosting at Photobucket

In other words -- the US may continue shopping.