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Consumer spending may be down, but its share of U.S. economic activity has increased. So, we're now more dependent than before on the average Joe's open wallet to guide us out of the recession. A year ago, consumer spending accounted for 70% of the U.S. economy. Since then, it has edged up to 71%. The long-term average is approximately 65%.
The increase in consumer spending's share of the economy indicates that other sectors fell harder. Business and construction spending on new equipment have constricted at a record rate since 2008. This isn't unusual, though, as consumer spending tends to take a larger piece of the economic pie during downturns.
For the 40 years starting in 1946, consumers accounted for 65% or so. The consumer segment of the economy began to approach the 70% threshold in 2000 when it reached 68.6%, thanks to easy access to credit. Last year, it hit a record of 70.1% and hasn't looked back, yet.
Personal spending was down $195 billion from the second quarter of 2008 to the same one in 2009, a 1.9% year-over-year drop. The decline doesn't seem like much, but the decline followed 20 years of 3.3% annual growth.
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Reader Comments (Page 1 of 1)
10-12-2009 @ 11:01PM
william lindblad said...
I agree, however there are a few problems. How can it be expected that consumer spending is going to carry the load to recovery when the source of consumer income is generally related to a job. Add this equation, and you get a negative result.
As is the case with government data the un-employment rate is set at about 9.8%. One has to keep in mind that this is the same as all statistical data, basically empirical as it discounts many other factors. The true rate is anywhere from 3%-8%+ what is reported. Since none of us know the real figure this gray area remains, the only figure that will matter will be job CREATION, and until there is progress in that area, a consumer driven economy is little more than wishful thinking.
Please keep in mind that even Wall St. discounted earnings of many companies as due to cost cutting and the C.C. words generally equate to the better known "layoff".