One way to measure the success of the US economy is to review consumer spending. While Q4 2018 business spending escalated to 2.6 percent, economists are concerned that Q1 2019 will not even grow at half that level due to “sluggish consumer spending” as well as the government shutdown.
One of the reasons for the positive Q4 2018 figures was due to a 13.1 percent acceleration in intellectual property as well as a 6.7 percent increase in equipment spending. The concern is the significant slump in retail sales from last December which could indicate shakier consumer confidence at the beginning of 2019.
It was also found by the Bureau of Economic Analysis that consumer spending in 2018 comprised 68 percent of America’s economy. As well, in Q4 2018, consumer spending reached $14.2 trillion; two-thirds of which is on services like housing and health care and nearly a quarter on non-durable goods like clothing and groceries.
High levels of consumer spending is good for the economy and significantly contributes to the 2-3 percent healthy GDP growth rate.
Still, if it’s true that “Americans apparently reduced spending in December by the largest amount since the economy exited recession in 2009,” then something has to be done to change the trend.