An expectational view of consumer spending prospects

Abstract

While the path of the economy clearly depends on a lot more than the behavior of consumers, the latter is surely one of the key influences on the former. After all, consumer spending counts for about two-thirds of the total (more if consumer investments in owner-occupied housing are included), and postwar business cycle movements in the U.S. have typically been foreshadowed by significant changes in consumer spending, particularly for automobiles and houses. Thus, whether the economy will be proceeding along at reasonably satisfactory growth rates, sliding into recession, or accelerating into renewed expansion will be heavily influenced by what consumers do.