Consumer Spending

Consumer Spending was up briskly, if One does not consider the effects of inflationary pricing, what with the increase in energy pricing. The same could be said for increases in Income. Both adjusted for Inflation and prices likely gained 0.3% in October. This effectively means a non-gain in terms of Personal Savings. This is getting to be the problem.

Less Cash in Their PocketsTrends in Incomes, Wages, Taxes, and Health Spending of Middle-Income Families, 2000-03
by Lawrence Mishel, Michael Ettlinger, and Elise Gould

Although employment has grown since September 2003, it has not done so at a sufficient rate to diminish the substantial labor slack generated by the downturn in 2001 (Mishel et al. 2004). Consequently, pre-tax incomes fell for three years in a row, leaving the typical household with $1,535 less income in 2003 than in 2000, a drop of 3.4%.

Even with a drop in federal tax payments, married-couple families with children still saw a slight 0.2% decline in real after-tax income, while young singles and elderly couples each lost 1.4%.

health care costs are indeed squeezing families. Out-of-pocket expenditures have grown by 33% for families with employer-based health insurance (married couples with children, single mothers, and singles), and elderly couples relying on Medicare saw a 37% increase. Payments toward employer-provided insurance premiums grew by roughly 50%, while Medicare Part B premium contributions rose by 29%. Family health costs rose 43-45% for married couples with children, single mothers, and young singles. In contrast, family incomes for these groups rose far less—by less than 4%—before any adjustment for inflation. For married couples with children, for instance, health costs escalated $1,125, from $2,630 in 2000 to $3,755 in 2003, while their non-inflation-adjusted incomes only rose by $2,283

Generation BrokeThe Growth of Debt Among Young Americans
October 13, 2004
By Tamara Draut and Javier Silva

Among young adult households with incomes below $50,000 (2/3 of young households), nearly one in five with credit card debt is in debt hardship-- spending over 40 percent of their income servicing debt, including mortgages and student loans.


A clouded outlook
Nov 30th 2004
From The Economist Global Agenda

America never suffered a full-blown recession: its firms shed labour, but its households did not rebuild their savings.
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The growth in Income seen comes mainly from new Employment and hefty Salary increases in the upper-Income brackets. The Consumer Spending, though, comes not from the new Hires, or the non-Consuming upper-Income brackets. Ordinary middle-Income Households maintain their necessary Consumer expenditure pattern by increasing their Consumer Debt. The picture worsens as Debt Service accounts an increasing share of Household Income. We remain in a poor health posture for the Economy. lgl