- US growth is anaemic
- Households are doing the right thing
- Public sector debt is the key


By Eva Brocklehurst

Why has US economic growth been so anaemic? Why for so long? Is there light at the end of the tunnel? The answers, according to DBS Bank, lie with public sector debt. While the household sector was busy taking its medicine and reining in its debt, public sector debt grew. DBS notes US households have cut their debt load by 14 percentage points of GDP since March 2008 but government debt has grown by 34 percentage points over the equivalent period.

While US households were fixing their balance sheets they weren't spending. So, a big drag on the economy has been consumption, or the lack thereof. US GDP has averaged a bare 2% for the last four years and consumption, which is the lifeblood of the US economy at 71% of GDP, has averaged growth of just 1.75% over the last six quarters, DBS notes. Households are starting to spend again, having paid back debt over the last two to three years, but it's slow going. Leverage has been reduced as a percentage of GDP to 83%, from a peak of 98% back in