(영어번역가학원)If Consumers Won't Kick-Start the Economy, What Will?(09.05.14)There may well be green shoots in the economy, but American consumersare still withering. That was the message from the Census Bureau'sretail sales report on Wednesday morning, with sales dropping 0.4%overall in April. Forecasters had expected no change.
It's worth pointing out that this difference was within the survey'smargin of error. That is, the decline could just be noise. But othernews in the report — and evidence from other sources — points to aconsumer-spending trend that is at best flat. Retail sales excludingautomobiles, a better indicator of the underlying trend, were down0.5%. March's overall sales decline was revised down to 1.3% from 1.2%.And so on. (See the top 10 financial collapses of 2008.)
None of this means that the recent talk of a turn in the economy isnecessarily nonsense. It's just an indication that consumer spending,typically a driver of economic upturns, may well be a drag this time.Personal-consumption expenditures as measured by the CommerceDepartment's Bureau of Economic Analysis had grown to more than 70% ofgross domestic product (GDP) in recent years, well above the1950s-1990s average of 64%. This was an artifact of the consumer andmortgage credit boom of the 2000s, and economists ranging from MorganStanley's Stephen Roach to White House economic czar Larry Summers hadbeen proclaiming for several years that the percentage had to comedown. It has thus far stubbornly refused, with consumer spendinghitting 70.7% of GDP — close to a record — in the first quarter of thisyear. American households have lost too much wealth and the job marketis too miserable for that to keep up much longer.
As a result, the best-case scenario for an economic recovery is onein which the consumer's share of economic activity shrinks, but gainsin other sectors are enough to keep the economy growing at leastmodestly. In GDP lingo, those other sectors are government-consumptionexpenditures, gross private domestic investment (business plus housing)and net exports. Let's run through them:
Government spending is the easiest to predict. With only 6% of the$787 billion stimulus package disbursed thus far, there's a lot ofspending on the way in the next year and a half. After that, pressurefrom buyers of Treasury securities will probably force a return tofiscal discipline. But over the short run, government should provide abig boost.
Business investment fell at a staggering 38% annual rate in thefirst quarter — the worst such performance since the government begankeeping quarterly records in 1947. That can't go on forever, and muchof the recent talk of green shoots has to do with indications thatbusiness spending is at least starting to stabilize. Investment inhousing was also down 38%, the sharpest drop since 1980, and there,too, optimists have found early signs of stabilization. It's notunreasonable to think that, sometime in the next few quarters or evenmonths, business and housing will stop dragging the economy down andbegin to provide at least a modest boost. (See pictures of retailers that have gone out of business.)
But it's a complicated equation — in laying off workers by themillions, corporate America may have cut costs and cleared the way forfuture profits and investment, but it has also reduced the number ofconsumers able to do any spending. Similarly, the current death throesof the housing market may prefigure an eventual rebirth, but in themeantime, falling prices and rising foreclosures are still wreakinghavoc with consumer finances. More troubles for consumers could lead torenewed troubles for business and in housing, meaning there arefeedback loops at work here that no economic forecast can fully capture.
Which leaves net exports. The last time the U.S. actually exportedmore goods and services than it imported was in 1980, and a positivetrade balance isn't in the cards anytime soon. But if U.S. consumerspending remains anemic, a rebound overseas could shrink the tradedeficit and thus boost the economy. There's just no concrete evidenceof that happening yet — the March trade figures, released on Tuesday,showed exports declining faster than imports for the month. Over thesomewhat longer term, the big question is whether the global economycan be rebalanced in a way so that the likes of China, Korea, Japan andGermany don't run such big trade surpluses and the U.S. doesn't runsuch big deficits. Without such a shift, it's hard to see how the U.S.can put together a strong, sustainable recovery.
(영어번역가학원)If Consumers Won't Kick-Start the Economy, What Will?(09.05.14)
