U.S. Gross Domestic Product which measures the output of all goods and services approximates $21.5 trillion annually. Of that, consumers, you and I, account for nearly 70% of total output. So, if household spending is our nation’s primary driver or economic growth – how indebted is the household sector as a percentage of income?
Ironically, despite the destruction stemming from Covid-19, households are in their best financial shape in decades to meet their obligations and to weather the storm. As depicted in the chart, the Financial Obligations Ratio is currently 9.7%. The Financial Obligations Ratio includes rent and mortgage payments, auto lease installments, homeowners’ insurance, and property tax expenditures.
The Federal Reserve closely monitors the financial health of the American consumer and acts expeditiously to keep our way of life as surefooted as possible. 2020 has proved to be anything but normal, yet still, the Fed’s monetary policy coupled with Washington’s unprecedented stimulus has been received favorably by Main Street and Wall Street. I applaud our elected officials for keeping the United States out of a deep depression.
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