Consumerism Back on Track?

The American consumer spending should result in increased economic growth during the second quarter of 2016. Consumers are the engine of US economy. Most businesses in the US feel the effect whenever a consumer changes his spending pattern.  The latest forecast about consumer spending in US supports the view that the consumers have regained confidence in the economy and their personal financial security. Retail and food service industry reported a 0.6 % increase in sales for the month of June as compared to May in 2016. Revenues rose by 2.7% in June 2016 as compared to the previous year. American consumers were more inclined towards on-line shopping. The e commerce websites, Amazon and Etsy recorded 14.2% profit in June 2016 as compared to June 2015. Retailers Walmart and Target who  also have e-commerce platform recorded similar profits. The trend is expected to continue in the following months due to various types of discounts offered on purchases. Other sectors of the economy like health and beauty supplies recorded 8.4% increase in revenue, while residential construction industry in the category of single family units witnessed an increase of 14% as compared to the previous year. The trends for the US economy indicate an average savings rate for 2016 is 5.171, slightly  higher compared to the previous year.

The graph below displays the savings percentage savings for the years 2010-2016 and the projection for the year 2017. Savings percentage increased steadily from 2010 and reached the maximum in the year 2012. The savings percentage dropped to minimum in the year 2013. There is a slow and marginal increase every year, for the years 2014-2016. The observations from the graph indicate that the savings percentage in the present year 2016 is unlikely to reach the level of 2010. The graph displays a cyclical pattern/trend related to the increase and decrease in the savings percentage. The trend projected for year 2017 is based on the extrapolated data of the previous years.

The lessons learnt during adverse conditions are remembered in good times. Americans have significantly reduced their expenditures and their focus now is on saving money. This is possibly a behavioural trend. One of the problem facing the growth of US economy in recent times is the increase in spending habits of Americans. The money spent by consumer is approximately 67 % of GDP. Higher savings translates into less spending and the net effect is lower economic growth. Americans clearly prefer to save than spend money in the aftermath of financial crisis. The shift toward increased savings has risen since Americans view the macroeconomic environment as a permanent type of risk after the financial crisis.

The policies of US administration ensure that significant number of American households have a potential to reduce their energy bill by adopting solar energy. One in five Americans cite saving money on the top of their financial priorities. Around two-thirds of Americans are making progress in saving money to handle emergencies.

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