Consumer Leverage Ratio

Consumer Leverage Ratio is a term popularized by William Jarvis and Dr. Ian C MacMillan in a series of articles in the Harvard Business Review and refers to the ratio of total household debt, as reported by the Federal Reserve System to disposable personal income, as reported by the US Department of Commerce, Bureau of Economic Analysis.Many economists argue the rapid growth in consumer leverage has been the primary fuel of corporate earnings growth in the past few decades and represents significant economic risk to the US economy. Jarvis and MacMillan quantify this within specific businesses and industries in a ratio form as Consumer Leverage Exposure (CLE).

Consumer Leverage Ratio = Total household debt/ Disposable personal income

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