Tuesday, October 9, 2012

What makes this economic recovery so difficult for the US consumer

Why is it that this economic recovery feels so sluggish to US consumers relative to previous recessions? One answer is that growth in disposable income has been horrible (chart below). It explains the relatively weak consumer sentiment and anemic growth in consumer spending.

Source: Barclays Capital

That is why this sudden increase in food and fuel prices (chart below) is an unwelcome development. With low personal income growth, the US consumer is now far more sensitive to these shocks than during the previous recoveries.

Active NYMEX unleaded gasoline futures contract price

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