Spending down. What’s up?
January 14th, 2008 | by Paul |If those folks at the New York Times can be trusted, personal consumption accounts for 70 percent of the economy. That freak you out? Think of it. All the business mergers, corporate purchases, billion-dollar companies buying billion-dollar companies, and so on make up less than one-third of the economy. The lion’s share is from us buying cars, boats, houses, burgers, pop, toys, aluminum siding, jewelry, video games and so on.
That was one of the two facts from this New York Times article that really weirded me out. The article’s about Americans cutting down on spending in December. One section, the one that weirded me out, dealt with why this cut in spending might not be an indicator of recession. Here’s the section, but I still recommend you read the whole article. It’s fantastic.
“Even in tough economic times Americans rarely reduce their consumption, preferring instead to slow the growth in their spending. Since 1980, they have cut spending in only five quarters — a total of 15 months — most of them in the depths of a recession. The 2001 recession passed without a cutback in consumer spending.”
So even when there’s a recession on, Americans by-and-large don’t stop buying stuff. I’m making no moral judgement here, but it’s certainly food for thought.