Here’s How Frigid Weather Is Hurting the Economic Recovery
For the United States, 2013 was a “year of big improvement in consumer spending after two years of very weak growth,” JPMorgan Chase global economist David Hensley told the Associated Press. “Businesses were pleasantly surprised by the increase in consumption.” Economists at Morgan Stanley say fourth-quarter numbers will show that consumer spending rose at its fastest pace in three years during the final three months of the year, and now, economists are beginning to believe that consumers will drive stronger growth in 2014.
While the overall picture of consumer spending is one of improvement — improvement that is gaining momentum — a closer view showed more conflicting indicators about the health of the American consumer, especially when the inspection is made along socioeconomic lines. For much of last year, sales of big-ticket items like cars and houses were strong, likely the result of pent-up demand, but spending was generally sluggish in retail stores and restaurants.
That pattern suggests that American consumers were more confident purchasing longer-term “big ticket” items than they were increasing everyday expenditures. There was also evidence that American consumers were keeping their purchases limited to immediate necessities. Confidence in the economy and the economy’s ability to create enough jobs to fill the gap left by the recession remained low for much of 2013.
Economists have identified several trends that will help to further strengthen consumer spending patterns, and chief among them is an ongoing low rate of inflation. With low inflation, shoppers will be able to stretch their dollars, euros, and yen further. Furthermore, because the Federal Reserve Bank of the United States, the Bank of England, and other central banks have kept interests rates very low, borrowing has been less expensive, enabling consumers to afford higher-cost items like cars and appliances.