As millions of consumers are still struggling to get their finances under control in the new year, many experts are now predicting that consumer spending will likely slip somewhat compared with the growth seen in the last quarter of 2011.
Financial difficulties are still plaguing many Americans years after the apparent end of the recent recession, and these problems are expected to depress consumer spending in the new year, according to a report from the New York Times. The forecasting company Macroeconomic Advisors believes consumer spending will grow roughly 2 percent in the first half of the year, down from about 3.6 percent in 2011’s fourth quarter, but up slightly from 1.8 percent in the third quarter.
Consumer spending accounts for 70 percent of the economy, the report said. Consequently, experts believe the slow growth in this area is likely both a result of and a hindrance to the slow economic recovery.
Another potential indicator of this shift is that consumer spending ahead of the holidays, which usually grows stronger as Christmas approaches, actually slackened soon after Thanksgiving, the report said. That prompted many retailers to start slashing prices in the week before Christmas, but it’s not yet known if the discounts had an effect on consumer sentiment.
Of course, experts also say that the reason spending will likely stay flat is understandable, the report said. Incomes haven’t improved much in the last year and job growth has also been sluggish. In addition, some 40 percent of the new jobs that have been created have been in the retail and hospitality industries, which typically carry lower wages than others.
Millions of Americans experienced various financial problems during and in the immediate wake of the recession and the fallout is still being felt today. Many still have high monthly bills as a result of credit card debt they racked up, and that can make spending in other areas more difficult to afford, even if those considerations are for necessities such as food and gasoline. This has led many to start putting even more on their credit cards and increase the amount they owe to lenders, rather than reduce debt as they may want. Many experts advocate sitting down and creating a family budget that will help them formulate a sound plan that will help consumers get their debt under control.