The American Consumer Cannot Prop Up The Economy Forever: “Something Has To Give”

by | Oct 15, 2019 | Headline News | 4 comments

Do you LOVE America?


    While consumer confidence can boost the economy and spending can drive growth, the consumer cannot prop up the economy forever. Wages are not keeping pace with price increases, so at some point, “something has to give.”

    In spite of the trade war and tariffs driving up prices, the latest evidence that the American consumer is unaware that a recession could be on the way is the University of Michigan’s consumer sentiment survey released Friday. Consumer sentiment rose to a three-month high of 96, beating consensus expectations and remaining near record levels. Even as economic growth abates and business investment and confidence have faltered in the face of an ongoing United States-China trade dispute, the U.S. consumer has continued to spend money and reflect confidence in sentiment surveys.

    According to Market Watch, this rampant consumerism can’t last forever. The reading is bullish for U.S. equities as it predicts the U.S. consumer will continue to spend at a very high rate headed into the holiday season. However, it also stands in stark contrast to other measures of the economy, including recent surveys by the Institute for Supply Management of the manufacturing and services sectors and measures of business executive confidence, which fell to the lowest level since the first quarter of 2009 in October.

    “I’m not sure if we’ve seen this disparity between positive consumer sentiment and negative business confidence at this level,” Michael Arone chief market strategist at State Street Global Advisors, told Market Watch.From my perspective, something has to give. Either businesses have to be more confident, or you’re likely to see more rollover on the consumer data.”

    But others say this isn’t necessarily a bad thing. As Sundial Capital Research pointed out on Twitter, previous instances of high consumer confidence and low executive confidence have actually turned out well for stocks.

    JJ Kinahan, chief market strategist at TD Ameritrade said that in the near term, it’s unlikely that American shoppers will slow their spending and cull their consumerism. “People are employed and when they are employed they spend money,” he said. “Heading into the holiday season, I see no reason why the consumer would slow barring some disaster.”

    But the weakness in the manufacturing sector will, at some point, hit the consumer. Liz Ann Sonders chief investment strategist at Charles Schwab told MarketWatch that while some analysts are eager to write off manufacturing weakness as inconsequential due to that sector’s shrinking role in the American economy, “there’s a reason why indices of leading economic indicators rely on manufacturing. It’s because there’s a multiplier effect from the sector that filters through to others.” She added:  “Manufacturing weakness often tips over into the consumer side.” 




    It Took 22 Years to Get to This Point

    Gold has been the right asset with which to save your funds in this millennium that began 23 years ago.

    Free Exclusive Report
    The inevitable Breakout – The two w’s

      Related Articles


      Join the conversation!

      It’s 100% free and your personal information will never be sold or shared online.


      1. The American consumer is 70% of the economy as manufacturing has been declining for decades due to fiat currency and later accelerated with the evisceration of manufacturing complements of “Free Trade” with virtual slave labor nations. It’s inflate, pop, re-inflate.

      2. In my generation, you have covered every flat surface with a McMansion and strip mall, then, filled those with ‘urban’ people and foreigners.

        Other than that, there are no signs of productive labor, that would support an economy.

        It begs the question of what is labor vs. (debt) capital.

        I could stomach the importation of menial labor, but you have mainly imported placeholders and borrowers, far underwater.

      3. It’ll get worse as people are replaced by robots.

      4. A consumer propping up an economy is like a termite propping up a tree.

      Commenting Policy:

      Some comments on this web site are automatically moderated through our Spam protection systems. Please be patient if your comment isn’t immediately available. We’re not trying to censor you, the system just wants to make sure you’re not a robot posting random spam.

      This website thrives because of its community. While we support lively debates and understand that people get excited, frustrated or angry at times, we ask that the conversation remain civil. Racism, to include any religious affiliation, will not be tolerated on this site, including the disparagement of people in the comments section.