One question alone seems to dominate the minds of economic forecasters: “Will Americans continue to spend?” With business spending, the stock market and major world economies in retreat, American consumers seem to be the primary factor holding back a nasty recession.
And economists are nervous that record-high debt levels will force Americans to curtail their spending.
The binge may be reaching its limits. In June, U.S. consumer borrowing fell for the first time in three-and-a-half years. The savings rate has also levelled off after years of decline.
Yet while total household debt is equal to total current household income, consumers’ overall assets are worth 6.5 times as much as their debt.
So as the income tax rebates flow from Washington, economists hope consumers will use part of that money to pay off debt and improve their financial standing. But they also have their fingers crossed that part of that money will be spent.
Source: Anna Bernasek, Honey, Can We Afford It? Fortune, September 3, 2001.
For more on Consumer Debt http://www.ncpa.org/pd/economy/econ2.html
FMF\28 August 2001
