These two charts show why the U.S. economy is ready for a rebound

September 26, 2013

It's been a rough year for the economy, with federal budget cuts and tax increases holding back expansion, and growth muddling along at the 2 percent or so rate that has prevailed for more than four years.

But two key underlying trends point to better days ahead, argue economists at consulting firm IHS Global Insight.

Source: IHS Global Insight
Source: IHS Global Insight

First, household formation is heading up nicely – people who bunked with parents, put their marriage plans on hold or stayed in that ratty apartment with three college friends are apparently spreading their wings. That should boost housing demand, not to mention consumer traffic at Bed, Bath and Beyond.

Source: IHS Global Insight
Source: IHS Global Insight

Second, households have largely tackled their debt problems – or are at least on the path to doing so. A debt profile poised for disaster – at an average of more than 130 percent of household disposable income – is quickly heading below 100 percent, good news for consumer spending.

So those two trends could create the raw fuel for healthy economic expansion in 2014. If, that is, policymakers don't stand in the way.

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Ezra Klein · September 26, 2013