U.S. consumer spending poised for downturn

WASHINGTON, Nov. 12 (UPI) -- Recent data indicate the U.S. consumer, responsible for two-thirds of the U.S. economy, may cut spending sharply through 2009.

Automobile sales plummeted in October falling 32 percent in the third quarter, The New York Times reported Wednesday. Major electronics retailer Circuit City filed for Chapter 11 bankruptcy this month and income growth is lagging behind inflation, the Times said.

The employment picture also points to the possibility spending may fall next year.

The job market "already appears to be in worse shape than at any time during the recessions of the early 1990s or early 2000s," Lawrence Katz, a former U.S. Labor Department chief economist told the Times.

On balance, an economic stimulus package of $400 billion would be required to make up for a 1 percent drop in spending. While a stimulus bill may be forthcoming, current discussions in Washington point to a possible stimulus package of about $150 billion.

U.S. families spent 91 percent of their income from the 1950s to the 1980s, saving the rest, the Times said. In recent years, spending has increased to 99 percent of household incomes, an indication that spending less may be overdue.