The American Consumer

The American consumer takes center stage today as the rest of the world waits ...

The question on everyone's mind is whether or not the seemingly insatiable desire for consumer goods has diminished in any way in light of recent energy price shocks and increasing evidence of a housing market slowdown.

Based on a very informal survey of an infinitesimally small sample group yesterday, it seems the answer is no - the American consumer is, as yet, undeterred.

An editorial in the L.A. Times today notes:

It's easy to deride consumerism. Yet the crowds at the stores today and in the weeks to come will not just be grasping for the latest mass-marketed gadgets and gewgaws. They will be taking a leap of faith and making a vote of confidence in the resilience of the U.S. economy. The fabled American consumer, buoyed by low interest rates and a booming housing market that has turned many homes into ATMs via refinancings, has carried the economy for much of the decade, from the trauma of the dot-com bust through 9/11, corporate scandals, war and the epic hurricanes (and those equally epic fuel costs) of this fall. In the third quarter of this year, the nation's economy grew at a brisk 3.8% annual rate. Remarkably, that was the 10th straight quarter of growth of 3% or greater.

Yes, American consumerism as a leap of faith - a consumer society that is the engine for global growth. It's funny how this is so commonly accepted as being just the way things are today - that this is just how the world works now - low interest rates, a booming housing market, and homes as ATMs.

Not necessarily accepted by this editorial writer, but by consumers.

Last month's real GDP number doesn't look so good when you consider how much debt has been racked up and how inflation continues to be under-reported, but those things just don't seem to matter - the key here is faith ... and more consumption.

There are clouds on the horizon, of course. (There always is in the consumer economy.) Fuel costs could shoot up again, and the stalling housing market in much of the nation could make Americans feel less prosperous. And when it's all over early next year, those December credit card statements could hit mailboxes just in time for a rise in interest rates. But economics isn't always about black or red. It's usually about the grays. With other engines of growth coming on strong, such as business investment and government spending, the economy may be able to continue thriving with a less exuberant consumer.

Government spending coming on strong is completely understandable - that's what governments do (especially this one and especially now). But business investment as an engine of growth in the early twenty-first century is not something that you hear a lot about, unless of course this is intended to mean business investment overseas - that would be understandable.

Isn't the whole concept of an American economy "continuing to thrive with a less exuberant consumer" at odds with everything we know about our economy today?