Long Term Perspective
The debt-to-income ratio peaked in the fourth quarter of 2001, at the same time that the personal savings rate plunged in response to increased auto purchases. Trends improved since 2001 - but the personal savings rate fell sharply in 2005 and remains mired in negative territory in 2006. In periods of economic uncertainty, or during recessions, consumers tend to add to savings and diminish debt burdens. Part of the decline may be related to the official savings data not capturing gains in home equity and with consumers spending out of home equity.

Short Term Perspective
The debt-to-income ratio has been a little volatile over 2006, primarily reflecting swings in income growth. Savings remain negative in the official numbers and again this is likely due to not including most of the home equity gains from strong gains in home prices. Slower consumer spending growth could potentially boost savings, but this would dampen overall economic activity.