Across-the-Board Consumer Spending Drop Fuels Recession Fears
- Jan 14, 2008
New York–Consumer spending may be slowing at every level of the U.S. economy, which may be enough to roll the economy into a recession, according to The New York Times.Although economists had noted an ongoing decline in growth, spurred by the weak housing market and rising energy prices, a rare personal consumption drop–the first since 1991–would almost certainly prompt a recession in the middle of the year, the Times said.A number of retail companies, ranging from Nordstrom and Tiffany to Target, saw a decline in growth in December. In addition, American Express, which services 52 million cardholders, said its spending rate growth fell 3 percentage points last month from 13 to 10 percent–the first decline since the 2001 recession.Consumer confidence also has taken a hit. Economic satisfaction has hit a 15-year low, according to Andrew Kohut, president of the Pew Research Center.However, some economists feel December was just a fluke because average hourly wages and salaries, which have remained stable, must decrease to drastically affect consumer spending.Americans do not often reduce consumption, even in times of economic difficulty–since 1980, they’ve cut spending just in five quarters. Typically, spending reductions occur during recessions. However, some recessions–such as the one in 2001–don’t even show a drop in consumer spending, which comprises 70 percent of the economy.