US consumer spending is no engine for recovery
The all-consuming American consumer has pulled the US economy – and the world's – out of tough times so many times, it's hard to keep track.
But 2009 will probably not be one of them.
US retail sales fell an unexpected 0.1 percent in July, the Commerce Department reported Thursday. Even the wildly popular clash-for-clunkers program, which turbocharged auto sales, failed to push consumer spending into the black. Excluding motor vehicles and parts, sales fell 0.6 percent.
The decline is worrying, analysts say, because consumers make up two-thirds of the economy and don't appear ready to add much oomph to an economic upturn for at least the next several months.
"Households are in no position to drive a decent economic recovery," writes economist Paul Dales, of Capital Economics, in an analysis. "Falling employment, slowing wage growth and limited access to credit are taking their toll on spending."
The most worrying aspect is that core consumer spending – which excludes automobiles, gasoline, and building materials – has now fallen for five straight months, says Richard Moody, chief economist with Forward Capital Group, in a telephone interview. "I think that's going to remain fairly weak at least over the next several quarters."
"In the last decade, the US basically has been the consumer of last resort for the global economy," he adds. "How was the US consumer able to do that? The answer is debt."
Now that Americans are cutting back on debt, the world will have to look elsewhere for an engine of growth.
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