Consumer demand is weak, and to revive it, the government should act to help people reduce their debt burdens, says Stephen Roach, a senior lecturer at Yale School of Management.

"We've had over six years of unprecedentedly sluggish growth in consumer demand. The number has been 1.25 percent a year," he told CNBC. Personal consumption accounts for about 70 percent of GDP.

"We're so far short of growing the 70 percent of the economy the way we used to that we seriously need to think about new sources of growth," said Roach, former chairman of Morgan Stanley Asia.

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"Income is weak. Job growth is slow. We're not generating enough internal income. We've got policies like the Fed goosing asset markets to get consumers to spend through wealth effects, and that's just not getting a traction."

So what should government policy be?

"We've got a balance sheet problem," Roach said. "Let's put in place policies that would enable people to pay down debt more quickly and rebuild savings so they feel more secure about their long-term prospects for financial security."

Consumer credit rose at an annual rate of 10.2 percent in April to $3.18 trillion.

But some see the increase as a positive sign. "The ability of consumers to carry debt is vastly improved," Millan Mulraine, deputy head of U.S. research at TD Securities, told Bloomberg.

"This is what we need to see for us to believe that the economy will make that transition to a self-sustaining growth trajectory."

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