Is Debt Casuing Consumers to Cut Back?

Kimberly Watson, Editor in Chief
May 14, 2012 /

The perception regarding American consumers cutting back due to constraints placed on them by their debt situation does not seem to be supported. Reports show that their personal consumption, when related as a share of the Gross Domestic Product, is reputedly progressing at rate, defined as the highest since 1948; at 71.1 percent. By way of comparison, in the early nineteen-eighties, it was recorded at 62 percent.

This could be regarded by some as something of an inconvenience; perhaps by those advocating that the “Americans are retrenching”.  Included in the term “personal consumption” is the spending on imported goods, which accounts for Dollars drifting overseas. Add to this health care expenditure, about fifty percent of which is controlled by the Government.

The criteria are that other various sectors have become weaker and not that American consumers are all engaged on a shopping spree, but to what extent are consumers cutting back!   Reports state contributing factors, including slow investment, due to pessimism related to growth potential and the fact that net exports show negative results. The conclusion is that we are operating a trade deficit, but with a built-in shrinkage factor.

 

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