Mòre Bad Economic News

[privateinvestor]

Americans cut spending $7,300 since recession

Consumer spending has dropped an average of $175 a month since the recession began, and that was more than 42 months ago.

This post comes from Seth Fiegerman at partner site MainStreet.



The collapse of the housing market and the recession that followed forced consumers to cut back their spending by an average of nearly $200 a month, a report shows.



Between December 2007, when the recession began, and May of this year, Americans cut their spending by an average of $7,300 compared with what they would otherwise have spent if the recession had never happened, according to a report from the Federal Reserve Bank of San Francisco. That means consumers spent $175 less each month on average during that period than before the recession.
•Bing: How have people cut back on spending

Kevin Lansing, a senior economist at the Federal Reserve Bank, analyzed the personal consumption trajectory before the recession, calculated how much it would have increased had the economy continued to boom rather than bust, and compared it with actual spending rates during the recession and after to find how much Americans were forced to cut back.





As Lansing notes, the consumption trend before the recession was "surely not sustainable" since it was largely made possible by inflated home values. Once the housing market went bust, this rate fell sharply.



Even by May of this year, 42 months after the recession began, spending levels per person stood at 1.6% below pre-recession levels. By comparison, Lansing notes in his report that it took only 23 months for individual consumption to return to pre-recession levels following the economic downturn from 1990-91.



From a consumer perspective, it might not sound like the worst thing in the world for spending levels to stay low, but as MainStreet has reported, the health of the U.S. economy depends on overall consumer consumption.

money.msn.com/how-to-budget/article.aspx?post=47168ab1-ce65-4361-9966-bd355faae287>1=33009

[billisonboard]

As Lansing notes, the consumption trend before the recession was "surely not sustainable" since it was largely made possible by inflated home values. Once the housing market went bust, this rate fell sharply.

....

... the health of the U.S. economy depends on overall consumer consumption.

Thus the fatal flaw in the consumer economy that was created after WWII, bouyed by the damage from that war and colonial underdevelopment of third world economies, and maintained by debt after those advantages ran out.

[privateinvestor]

Jul 13, 2011 14:53:22 GMT -5 billisonboard said:

As Lansing notes, the consumption trend before the recession was "surely not sustainable" since it was largely made possible by inflated home values. Once the housing market went bust, this rate fell sharply.

....

... the health of the U.S. economy depends on overall consumer consumption.

Thus the fatal flaw in the consumer economy that was created after WWII, bouyed by the damage from that war and colonial underdevelopment of third world economies, and maintained by debt after those advantages ran out.

Yes but don't forget that consumer spending accounts for a large percentage of our economic activity...and with consumer keeping his/her wallet in his hip pocket or purse that is not good news IMHO

Although my family is an exception to this decrease in consumer spending they spend every Saturday at the local malls looking for so called sales and they don't want to hear about the government turning off the cash spigot..

[❤ mollymouser ❤]

I've been doing my part and shopping.

[rileyoday]

My monthly spending is down alot more than 175 a month in the last ten years. We don't travel as much or dine out and only buy things we need, no more crap.

I have watched the industrial plants in Charleston WV close . They will not reopen,most have been scrapped. Impossible to ignore.

[jkapp]

Before the recession the economists were warning about the negative savings rates of the american consumer (meaning they were spending more than they were saving)...now they say people are saving too much and aren't spending enough.

I wish they'd make up their friggin' minds!! ;D

[floridayankee]

Jul 13, 2011 16:42:46 GMT -5 jkapp said:

Before the recession the economists were warning about the negative savings rates of the american consumer (meaning they were spending more than they were saving)...now they say people are saving too much and aren't spending enough.

I wish they'd make up their friggin' minds!! ;D

I'm fine with the debt reduction and increase in savings. Economic growth based on credit simply isn't sustainable, as we all found out. It simply moves future economic activity into the present and robs the future of that growth.

[privateinvestor]

From a consumer perspective, it might not sound like the worst thing in the world for spending levels to stay low, but as Main Street has reported, the health of the U.S. economy depends on overall consumer consumption.


If this trend continues for another 1 1/2 years it means unemployment decreasing to @ 5.0% - 6.0% would be at risk to say the least. Wall St is anxious about "Default" Main St is anxious about "Default & Consumer Spending", and our government is anxious about " Who's To Blame?"

IMHO,
P.I. ( Somewhat Anxious)

[mmhmm]

I've been doing my part, as well, molly. Been doing some redecorating around the ol' homestead. ;D

[mmhmm]

Jul 13, 2011 16:23:30 GMT -5 rileyoday said:

My monthly spending is down alot more than 175 a month in the last ten years. We don't travel as much or dine out and only buy things we need, no more crap.

I have watched the industrial plants in Charleston WV close . They will not reopen,most have been scrapped. Impossible to ignore.

That must be very hard to watch, riley. It's sad to see plants close and people put out of work; especially, when one feels sure there's no hope of those plants reopening and hiring again.

[floridayankee]

Jul 15, 2011 7:29:00 GMT -5 mmhmm said:

I've been doing my part, as well, molly. Been doing some redecorating around the ol' homestead. ;D

I just spent $70 and tiled the floor under the washer and dryer....and another $20 on a new fill valve for the stool.

[privateinvestor]

Yea ok but Joe Six Pack and Sally The Soccer Mom are not buying big ticket items which is needed if consumers are going to lead the way out of this economic malaise...or high unemployment...


Americans cut spending $7,300 since recession


This trend needs to change or my buds Joe and Sally may demand some changes in Washington DC in 2012...

[Driftr]

My wife and I are going ziplining this weekend, so we're doing our part.

[billisonboard]

Jul 15, 2011 8:04:51 GMT -5 Driftr said:

My wife and I are going ziplining this weekend, so we're doing our part.

Cool. My niece is going to attend University of Bath in England. I got an email from my sister-in-law that the niece wants to skydive with her uncle before she is out of the country for a couple of years. I am making the trek back "home" to do that this weekend.