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Consumer Confidence Projects Upcoming Demand Surge

June 20th, 2013 | by Morris Beschloss | Comments

Despite the many unresolved issues weighing on the hard-pressed U.S. economy, the consumer sector, comprising 68% of the nation’s $15.8 trillion gross domestic product, seems ready for a surge on the upside.

Latest statistics, indicating the highest consumer confidence index since pre “Great Recession” days, foresee a spending splurge, despite the reversal of the social security tax withholding rate, which had been reduced as a stimulus three years ago.

While continuing Congress/White House resolutions have taken the ongoing debt/deficit crisis off the table for now, the combination of stronger job growth, easier bank lending, unexpected 401ks nearly doubling, and a multi-year positive savings rate, seems to have stimulated the still massive working community to open their pockets. Awaiting are orders for durable goods, such as appliances, new cars, and even furniture, at levels not seen since 2007.

Also adding to a guardedly optimistic consumer outlook is the increase in new family households, which have been lagging during the past five years. Although relatively slow in rebounding since the technical end of the financial crisis in 2010, the pace is picking up this year; after plunging dramatically in 2008-09. Previously, U.S. household formation pre-recession highs had reach 1.45 million annually in 2006.

While bouncing back to slightly over 1 million in 2011, these household gains are projected to eclipse the recent highs with 1.54 million formations by 2015. This is based on a pent-up upward breakout being signaled by current consumer-related developments, and would exceed the 1.45 million high posted previously.

1) Vehicle sales are already leading the way. Estimates indicate that each new household leads to an average 1.3 new car purchases.

2) Marriages are projected to move upward as young people move out of parental or relatives’ homes to establish their own housing, as the jobs market inches upward.

3) Births. While annual births fell by 7% to 4 million from 2007 to 2010, reputable statistics cite that families spend about $250,000 on a child from birth through age 17. This is confirmed by Agriculture Department estimates.

While the decreasing percentage of Caucasians, which is on a long-term downward trend, is expected to continue into the foreseeable future, the dynamic expanse of the Hispanic Community will more than make up that downtrend, closing in on 375 million or more from the current U.S. population of 320 million by mid-century.

The continuous surge of immigration into the U.S. will likely continue, no matter what type of Congressional Immigration Bill finally emerges from the House/Senate and its documented Presidential signature.

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