U.S. Economy Is Doomed Without Stronger Consumer Spending
With real incomes in the U.S. falling and households reluctant to tap their savings, growth this year will be minimal — or worse.
Shoppers are too cautious.
Photographer: Justin Sullivan/Getty Images
The U.S. Commerce Department announced on Thursday that consumer spending fell 0.4% in February from January after adjusting for inflation. This may not seem like much, but real spending has dropped in three of the last four months. Without strength in household outlays, the economic expansion is doomed.
Capital spending provided a minor boost to the economy but didn’t recover the losses from 2020 as business uncertainty and excess capacity persisted. The federal government has provided $4.6 trillion of fiscal stimulus since the pandemic struck, but almost half of this was money transferred to businesses and to households, which saved about 75% the payments, according to surveys by the Federal Reserve Bank of New York. As for money spent directly by Washington on government employee salaries, tanks, etc., it was just $1.5 trillion out of total budget expenditures of $7.0 trillion and the amount has dropped in four of the last five quarters in real terms.