As everyone gears up for the holiday season, retailers included, the American consumer is seeing better times than ever before. Following the great recession, things have looked up as employment is high, inflation is being tackled.
Despite businesses pulling back the U.S.-China trade war and a falling global economy, consumers appear to be plowing ahead. Consumer spending remains about 70% of the overall economy, so it is good news we’re spending!
According to Tyler Atkinson, an economist at the Federal Reserve Bank of Dallas, the consumers are what is driving the growth in the economy.
US consumers have become more optimistic since the recession, as employment has been at a steady climb among other favorable things.
Many consumers are proud of the record economic expansion, according to experts. The local employment rate is at record highs all across the country.
While rising healthcare and student debts loans are looking daunting and present many issues to the economy, consumers are quite confident about their salaries to keep on spending, according to analysts.
The reliable bump in the economy by households indicate signs of falling apart. The growth in household spending held steady at 3.9 percent in September compared to a year earlier, which is a major drop from the 5.2 last year in 2017.
The decline can be attributed to the confidence shown by households. According to the consumer confidence index, the consumer confidence is high, but has peaked ever since 2018.
The reasons for this ‘peaking’ can be explained by the fact that the economic expansion is starting to show its age. Atkinson of the Dallas Fed says the labor market is becoming very narrowed. After so many consecutive recovery years — people going back to work and getting raises — many households feel as though they’re simply charting a steady course of financial stability, rather than seeing noticeable gains year after year.
Thanks to this, consumer spending shows indications of declining in recent months, only increasing by 2.2% over last year’s August and September, according to analysis.
Reduced consumer spendings can be problematic in 2020 for policymakers. Federal Reserve has thrice already slashed rates in this year due to global economic weakness as well as the trade war between China and the US escalating tensions and hurting business ventures.
However as of now the dispute has largely spared U.S. households as tariffs placed on Chinese goods are not yet accessible to consumers, according to analysts.