CROSS-SECTORSECTOR COMMENT 26 July 2016ContactsBenjamin S. Garber 1.212.553.4732 Asst Dir-Economist benjamin.garber@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research,Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products.For further detail, please see the last page.Market CommentCautious US Consumer Borrowing Pace Bolsters Recovery Deep into the current economic expansion, consumer debt builds up at only a modest pace. With borrowings increasing at a slower rate than income, consumers are avoiding the type of leveraging that contributed to past recessions. Furthermore, in light of the protracted housing recovery and low interest rates, regular consumer financial obligations are near record lows. These positive consumer fundamentals contrast with corporations, which are raising credit risk concerns amid rising defaults and skimpy profit growth.MOODY'S ANALYTICS CROSS-SECTOR2 26 July 2016 Market Comment: Cautious US Consumer Borrowing Pace Bolsters RecoveryConsumer leverage is still shrinking Consumer debt burdens have shrunk relative to income for over eight years (Figure 1). The deep scars of the housing sector meltdown and the sluggish economic expansion have limited the opportunities and inclinations of consumers to borrow. Household debt as a share of disposable (after-tax) personal income fell to the 14-year low of 104% in the first quarter, substantially lower than Q4 2007s record of 133%. One element of that decline is the steady advance of income growth. Disposable income rose 4.4% year-over-year in the quarter ending May, accelerating from the 3.6% rate in the same period one year ago. That increase is not only outrunning consumer debt growth but is also supporting the healthy upturn in consumer spending.Rising income alongside historically low borrowing costs have greatly reduced monthly consumer financial obligations. The Federal Reserve estimates that household financial obligations equated to 15.3% of disposable ...
