Consumer spending in the US has been weakening due to social and economic pressures, raising concerns about the sustainability of the country's consumption-driven economy. Personal consumption expenditures (PCE) make up two-thirds of total GDP, indicating the significant role of consumer spending in driving economic growth [785d8929]. However, PCE growth has been slowing over the past 50 years, suggesting a diminishing economic influence [785d8929]. The US consumer's weakening can be attributed to several factors.
One factor is the increasing reliance on dovish monetary policy and government stimulus to fuel PCE growth. While these policies have supported consumer spending in the past, they may not be sustainable in the face of higher interest rates [785d8929]. Another factor is the rising household debt, which has been outpacing PCE growth. This debt-dependency raises concerns about the financial stability of US consumers [785d8929].
Furthermore, increasing inequality and a declining population growth rate are contributing to the weakening consumer. The United States has been experiencing a growing wealth gap, with the top 20% of income earners accounting for a significant portion of consumer spending [bf4c32f5]. On the other hand, the low-income consumer segment, defined as those earning $45,000 and under, has seen negative growth in the industry [bf4c32f5]. Additionally, the declining population growth rate poses challenges for sustaining consumer-driven economic growth [785d8929].
The relationship between the Consumer Price Index (CPI) and real PCE growth has also shifted. Consumer spending now drives CPI, indicating that as consumer spending slows, inflation may also be affected [785d8929]. This has implications for job creation and GDP growth, which are expected to falter as consumer spending weakens [785d8929].
To keep the economy going, ongoing fiscal and monetary support may be necessary, potentially leading to a US-Japanification scenario. This scenario refers to a prolonged period of low economic growth and low inflation, similar to what Japan has experienced [785d8929]. Despite technological advances, consumption growth has not significantly changed due to consumer-funding constraints [785d8929].
While the US consumer's weakening raises concerns about the sustainability of the consumption-driven economy, it also highlights the need for policies that address inequality, debt-dependency, and population growth. Balancing fiscal and monetary measures to support consumer spending while ensuring long-term economic stability is crucial for the US economy [785d8929].
According to a recent article from ETF Trends, the US economy grew at a faster pace than initially thought in Q3 2023, defying predictions of a slowdown. Consumer spending was the largest contributor to GDP growth. The Core PCE Price Index, a measure of inflation, cooled in October, giving hope that the Fed is done hiking rates. Consumer confidence rose in November, but concerns about rising prices, geopolitical conflicts, and higher interest rates remain [109c266f].
The article also highlights three key economic indicators: personal consumption expenditures (PCE), gross domestic product (GDP), and consumer confidence. PCE growth has been slowing over the past 50 years, indicating a diminishing economic influence. The rising household debt has been outpacing PCE growth, raising concerns about the financial stability of US consumers. Additionally, the growing wealth gap and declining population growth rate pose challenges for sustaining consumer-driven economic growth [109c266f].
The focus this week is on the labor market, with key job reports being released. Job creation and GDP growth are expected to falter as consumer spending weakens, which has implications for the overall economy [109c266f].
In Greece, the consumer class is projected to grow despite a declining population. The consumer class refers to citizens who spend $12 or more per day. Greece is among the 15 countries with the highest forecast for the expansion of the consumer class worldwide [d2c0414e]. The Greek consumer class is expected to grow by 24,000 people in 2024 and by 14,000 in 2025, reaching a total of 10.4 million people [d2c0414e]. The average Greek consumer is expected to spend €20,344 this year and reach €21,820 in 2030 [d2c0414e]. Total consumer spending in Greece will increase by €8.8 billion in 2024 and by €6.6 billion in 2025 [d2c0414e]. The growth in consumer spending is attributed to factors such as the activation of people who are not currently working, economic recovery and income convergence, improved economic outlook, growth-friendly fiscal consolidation, targeted support to vulnerable households, and substantial reforms undertaken by Greece [d2c0414e].
The contrasting situations in the US and Greece highlight the complexities of consumer consumption and its impact on economic growth. While the US consumer is weakening, Greece is experiencing an increase in consumer spending despite a declining population. These divergent trends underscore the importance of considering country-specific factors and policies when analyzing the relationship between consumer consumption and economic growth [785d8929] [d2c0414e].