Consumer spending in the U.S. rose in February for a fifth consecutive month, a rebound that may accelerate when employment strengthens.
“The consumer is still making traction with the overall recovery,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, who accurately forecast the rise in spending. “Factors are falling into place for the recovery to be sustained.”
Consumer spending once again has risen relative to income. Spin recognizes this trend as evidence supporting the labor market and economy. I argue that rising relative consumption is more a reflection of the deteriorating economic health within households than an indication of future economic strength.
Either Americans are truly reckless consumers, or they, struggling to keep their heads above water in troubled economic times, find themselves spending increasing amounts of their personal income on basic, survival consumption. I tend to view the rising ratio more as the latter. How much of personal income can be devoted to consumption – 85%, 90%, how about 100%?
Personal Income Edges Higher, March 03, 2010
We remain on the dangerous path of excessive consumption. It is this path, behavior, that got us into this economic mess. The cause of the problem will not be the solution.
Personal Consumption As A % of Personal Income or "Real Funding Pool":
Source: bloomberg.com
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