The Overburdened U.S. Consumer

With household balance sheets awash in a sea of red ink, how are U.S. consumers coping?

October 1, 2003

With household balance sheets awash in a sea of red ink, how are U.S. consumers coping?

Many economists credit U.S. consumers and their voracious spending habits with pulling the global economy through a difficult period. And yet, the balance sheets of U.S. households are increasingly awash in red ink. Our Globalist Factsheet takes a closer look at the ever heavier burden carried by U.S. consumers.

How much of their income do Americans save for a rainy day?

Between 1992 and 2001, the U.S. savings rate fell from 8.7% of disposable income to just 1.6%.

(U.S. Department of Commerce)

How does that stack up against the savings rate in other wealthy nations?

Throughout the 1990s, personal savings rates averaged 12% in Germany, 13% in Japan and 15% in France.

(Federal Reserve Bank of San Francisco)

How much money did U.S. households lose in the stock market?

In 2001 alone, the financial net worth of U.S. households fell by about 8%.

(U.S. Federal Reserve)

Have Americans fallen further into debt lately?

At the peak of the U.S. bubble economy, the ratio of U.S. household debt to GDP stood at 72%. As of 2002, that ratio stood at 79%.

(Ned David Research)

How does consumer debt compare to the income of U.S. households?

As of 2002, U.S. consumer debt stands at 90% of personal income — double the figure for the 1950s.

(Wall Street Journal)

Despite all the bad economic news, U.S. consumers continue to spend. How can that be?

As of 2001, the average U.S. household had six credit cards — with a total average balance (that is, amount owed) of $8,500.

(Washington Post)

How much do Americans use their credit cards?

In the United States, purchases on credit cards account for 21% of consumer spending — compared with 14% in Europe and just 8% in Japan.

(The Economist)

Have Americans been spending more on healthcare?

Between 1993 and 2000, U.S. healthcare expenditures rose from around $850 billion to $1.3 trillion.

(Midwest Business Group on Health)

What role do prescription drugs play?

In 2001, total spending on prescription medicines in the United States rose 16% to $142 billion — representing about 10% of the nation’s $1.4 trillion in health spending.

(Wall Street Journal)

How has the price of housing — the largest expense in consumers' budgets — developed?

As of 2003, U.S. mortgage debt as a percentage of disposable income, which peaked in late 2001, is still at 6.24% — higher than at any time during the 1990s.

(Mortgage Bankers Association of America)

What are U.S. homes worth?

At year-end 2002, the total value of existing homes in the United States was $13.6 trillion — and mortgage debt totaled around $6 trillion.

(Barron's)

How many households have housing costs that are beyond their means?

As of 2001, nearly 10% of U.S. homeowners — or 2.25 million — spent 50% or more of their income on house payments. That is up from 1.4 million households, representing 7.8% of all homeowners, in 1997.

(Mortgage Bankers Association of America)

How does the growth in home prices compare to the growth in household incomes in the fastest-growing real estate markets?

Between 1998 and 2002, home prices in New York’s Long Island suburbs grew by 81%, while incomes rose by only 14%. In Boston, home prices grew by nearly 90% — compared with income gains of only 22%.

(Wall Street Journal)

How can consumers still afford to buy a house?

Between 1989 and 1999, the average down payment for a first-time homebuyer in the United States fell from 10% to just 3%.

(National Association of Realtors)

How many consumers have drowned in red ink?

As of 2003, 750,000 U.S. homeowners are in bankruptcy proceedings — up from 450,000 five years ago.

(American Bankruptcy Institute)

How did household spending fare in 2003?

U.S. consumer spending rose by 0.8% in August 2003 from July 2003, following an increase of 0.9% a month before.

(U.S. Department of Commerce)

How does that compare to spending in 2002?

During the first two months of the third quarter in 2003, annualized inflation-adjusted U.S. consumer spending increased by 7.4%.

(Bear Stearns)

And finally, do Americans save enough for their retirement?

As of 2000, 69% of U.S. households with incomes over $100,000 had retirement savings that would allow them to maintain their standard of living after retirement. For households with incomes between $25,000 and $50,000, that figure stood at just 39%.

(Ohio State University)