Prudential Financial, Inc. (PRU)

Daily Spotlight: Household Finances in Good ShapeA combination of pandemic-related factors -- such as economic shutdowns and aggressive fiscal spending -- have resulted in a sharp improvement in household finances. The Federal Reserve keeps track of Household Debt Service Payments as a Percent of Disposable Personal Income. This metric (the lower the better) has fallen from 9.9% prior to the pandemic to a current level of 9.2%. During the depths of the pandemic, when households were receiving stimulus checks while sheltering in place, the ratio dropped to 8.4%. The average debt level since 1980 has been 11%. The high-water mark was established during the great recession (4Q07 to be exact) at 13.2%. We would not be surprised to see households take on a bit more debt in coming quarters, as pent-up demand subsides and consumer confidence improves while the unemployment rate declines. We think the sound condition of household finances is an important indicator signaling that GDP growth should remain positive into 2022.