Household deleveraging steadily progressed
Household finances improved somewhat in 2011 as consumers continued to pay down debt. Federal Reserve measures of household financial obligations ratios (FOR) reached their lowest levels since the mid-1980s. See the chart.
Personal income barely grew until the end of the year, so the primary way consumers lowered their debt was through saving more and spending less than they had in previous years.
Because consumer spending typically accounts for nearly 70 percent of the U.S. economy's total demand, this save-more-spend-less process likely contributed to the slower rate of growth overall. Consumer spending merely inched forward for the year, as real personal consumption expenditures rose just 2.2 percent from 2010, according to the U.S. Bureau of Economic Analysis.