Great, Now the Private Sector's Tanking, Too

Signs of life in consumer spending might help recovery, say economists
By Mark Russell,  Newser Staff
Posted Jun 10, 2012 1:02 AM CDT
Great, Now the Private Sector's Tanking, Too
After leading the recovery, the private sector appears to be declining, too, writes Paul Lim.   (Shutterstock)

(Newser) – The private sector has been the lone strength in the US economy since 2009, with business investment and corporate earnings leading the underwhelming recovery. Until now, that is. As the dollar strengthens and economies around the world are slowing, the private sector appears headed for a tough patch, writes Paul Lim at the New York Times. With government spending and international trade down, that leaves consumer spending the best hope for the US economy, says Lim.

"The United States is still the biggest economy with the largest consumer sector in the world, so it comes down to the US consumer," said the president of a research company. "There's a lot of pent-up demand in the economy." But personal consumption has grown at a sluggish 2% since the beginning of 2011, and consumers are already tapping into their low 4% savings rate. On the other hand, auto sales were up 26% in May from over the year prior, and housing is beginning to move, too. "Consumers can keep the economy going forward, keep it from kicking over," says the chief economist at an international research company. "But they're probably not going to be the prime movers in a robust expansion." (Read more consumer spending stories.)

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