There are a variety of factors that determine the strength of the US economy, including government spending and imports compared to exports and currency values levels. However, the biggest factor in determining the health of the economy in consumer spending, as is the case in most developed countries.
According to statistics released by the Federal Reserve (Fed) and expenditures of US consumers account for more than two-thirds of the nation's gross domestic product (GDP), the measure used to determine the growth in the economy. While the role of the consumer has not always played such a dominant role boost the economy, it was usually responsible for 60 percent or more of the economic activity dating back to the era after World War II.
It is worth noting that consumers have played a more prominent role in recent decades. According to the US Bureau of Economic Analysis, half a century ago, in 1966, consumer spending accounted for 59% of GDP. By 1991, the proportion had risen to 64 percent. Today, consumer spending represents 68.1 percent of GDP, was in a similar group since 08.
What is the role of consumers?
Economists and market analysts often keep a close eye on trends in consumer activity. If strong consumer spending, it could be an indication that most Americans have a high level of confidence in the direction of the economy. The total amount of consumer spending is not the only measure of people keep an eye on. Types of expenses can help determine the extent of high consumer confidence may be at any given time. For example, if the sales of luxury goods (expensive cars, jewelry) backward and people put more money into necessities such as food, shelter and clothing, it may not reflect the strong confidence about the expectations of consumers.
data on spending plays an important role in how companies and government agencies are planning for the future. If consumers show a high level of confidence, they are more likely to increase spending, as well as to try to take advantage of the opportunity to increase sales of companies. By contrast, if consumers are cautious about spending and companies may invest less and government policy makers have, in some cases, that has been chosen to provide incentives through tax cuts or spending increases to help give the economy a boost.
beconsumer spending trends also have a significant impact on monetary policy, which is directed by the Fed. If consumer spending lagging behind, can not the Fed decides to cut interest rates and take other steps to help start home and business spending. If consumers are spending too much too quickly, it may indicate that inflation could become a threat. The Federal Reserve may take steps, such as raising interest rates, in an effort to curb economic growth.
what can we expect?
is difficult to predict what the future will hold for the markets and the economy. One thing is certain - and economists and financial analysts are likely to watch consumer spending trends continue to measure where the economy is heading.
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