Consumer spending in the United
States accounts for over 2/3 of all economic activity in our country and we
just recorded our biggest increase in over 8 years, with a jump of 1.0%. This
in crease is largely due households in Texas and Florida, where they are
dealing with the aftermath of two hurricanes, replacing flood-damaged vehicles.
This was the largest increase since August 2009.
This
consumption was offset by a rise in inventory investment, business spending on
equipment and a increase in our trade balance due to a drop in imports. This
caused the economy to grow at a 3.0% rate in the third quarter which is a 0.1%
decrease compared to the second quarter. The Commerce Department contributes
this to the effects of Hurricane Harvey and Irma but said it “could not quantify
the total impact of the storms on consumer spending and personal income.”
It
is also worth noting that during this period where consumption has increased at
an 8 year high, personal income also increased by 0.4%.
https://www.cnbc.com/2017/10/30/us-personal-income-sept-2017.html
It seems that with income growing, consumer confidence being extremely high, and the recent disasters, we can expect an increase in spending for a little longer. Hurricane aftermaths are hard to fix, and it takes a good amount of time, as we saw with Katrina. So with 2 hurricane aftermaths, the stock market continuing to climb, and overall consumer confidence rising, expect to see spending rise. Although with a possibility of tax reform, consumers may be weary and hold off from large purchases to see the possible effects. We could see the same from large firms.
ReplyDeleteThis will all give a boost to the economy but the important thing policy makers have to remember is that the boost from private consumption growth won't last. Consumer spending to replace goods damaged in the hurricane is temporary. It would be good to learn more about what's keep investment growth going--the booming stock market? If so, that's also a worry.
ReplyDeleteThe recent hurricanes caused many households and businesses and infrastructures in the affected areas to be damaged.This caused the US economy to fall below the steady-state.These natural disasters will increase our spending levels because of the increase in our disposable incomes, which could be due to the increase in net exports. We would be spending more money at home because it is cheaper which would increase the money flow. This would also increase our incomes and increase our consumption. The outcome is an endless cycle. All of these factors will help us grow at a faster rate toward the steady-state. Once we finally reach our steady-state we will no longer see any growth and we will be at an equilibrium. The only way to see more growth is if we increase our total factor output.
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