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Analysts see consumer spending waning

Jan. 3, 2012 at 2:41 PM   |   Comments

NEW YORK, Jan. 3 (UPI) -- The largest single component of the U.S. economy, consumer spending, is standing on wobbly legs, analysts said.

"The consumer is far from healthy," said ITG Investment Research senior economist Steve Blitz.

Colin McGranahan, a market analyst at Sanford C. Bernstein, wrote in a note to clients to "expect slowing spending growth going forward," The New York Times reported Tuesday.

In a separate note, University of Maryland economics Professor Peter Morici wrote the economy picked up steam in the fourth quarter of 2011 "thanks to stronger consumer spending."

"However," Morici added, "the growth in consumption has been outpacing income, debt is piling up again, and some pull back in consumer activity is likely in the first half of 2012."

Consumer spending is the economy's flywheel, giving it momentum or slowing it down. Making up 70 percent of the gross domestic product, consumer spending can pull the economy out of a morass. It can also drag down even the best efforts to keep the economy going.

Spending, however, will remain tight as long as housing prices are depressed, which makes home equity loans that much harder to obtain, analysts say.

In addition, the sluggish recovery from the recent recession for many has meant losing a high-paying job and replacing it, if a job can be found, with a low-paying job.

The Times said 40 percent of the jobs added to the economy since June 2009 are low-paying jobs, typically in retail and hospitality.

Topics: Peter Morici
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