Monday, April 20, 2009

Consumer spending looks bleak going forward

Consumers are saving more, and paying down debt. Unless incomes start rising, this means lower consumption
US consumers have accounted for more than three-quarters of US GDP growth since 2000 and for more than one-third of global growth in private consumption since 1990. These trends were fueled by a surge in household debt,1 particularly after 2000 (Exhibit 1), and a decline in the personal savings rate—to a low of –0.7 percent, in 2005. From 2000 to 2007, US household debt grew as much, relative to income, as it had during the previous 25 years.
Remember: one man's consumption is another one's income.

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