The rampant consumerism in our society is what many say is driving the economy right now. But according to data points, many consumers are running out of available cash and credit to continue to prop it up for much longer.
While consumers have been dubbed the backbone of the American economy, their spending is waning compared to last year. After big increases in spending in the spring and summer, households appear to be cutting back. Sales at U.S. retailers, for example, rose a disappointing 0.2% in November, reported Market Watch. This is a sign that consumers are either running out of cash, available credit, or both. It could also mean that since prices have continued to increase, many have had to curb their unnecessary spending in order to buy necessities.
The growth in retail sales over the past 12 months has slowed incredibly to a modest 3.4% pace from a seven-year high of 6.5% just a year and a half ago. But others say that consumption is still high enough to provide a boost to the overall economy and could pick up more steam in the coming week as we approach Christmas.
Consumer spending, which is vital for the U.S. economy has been especially important this year considering the escalation in tensions over trade policy with China. The trade was discouraged business spending and slowed the economic growth globally. U.S. exports fell, investment tanked, and manufacturing activity contracted for the first time since 2016. And U.S. households paid for the tariff increases.
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“Unless there is a surge in December, it doesn’t look as if fourth-quarter consumer spending will grow anywhere near the 2.9% posted in the third quarter,” said economist Joel Naroff of Naroff Economic Advisors. The Trump administration has taken steps to ease the trade tensions with China, and will hopefully let up on the tariffs to provide at least some relief to the wallets of Americans.
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A strong labor market is propelling much of the spending and some other economists don’t expect that to change any time soon. “It is unlikely that the consumer sector will sour anytime soon,” said senior economist Ben Ayers at Nationwide.