Consumer spending decline damps economic growth

Since the housing market ceased to be hectic, consumer spending has remained a main driver of the US economic growth, accounting for two thirds of the country's total economic activity.

However, in the last quarter of 2007, consumer spending only registered a 1.9-percent growth on yearly basis, far less than the third quarter's 2.8 percent. And the growth rate of spending for the whole year even hit a record low since 2003.

Moreover, inflation-adjusted consumer spending showed zero gain in January 2008, the second straight flat reading since December.

Nevertheless, the good news is that personal income and disposable income continued growing in January, making it possible for more consumer spending in the future, analysts said.

What's more, consumer credit kept growing remarkably while household savings rate fell in January, which means consumers spent not only income but also part of savings or even borrowed to spend. This probably indicated that consumer confidence was not that low as many economists had expected.

Exports slump may cripple economy

Exports had been propping up the U.S. economic growth till the last quarter of 2007 when they put up a poor performance in terms of contribution to economy.

Strong US exports have been attributed to a weak dollar and fast economic growth in many other parts of the world.

Analysts said the US dollar could remain weak as they expected further rate cuts from the Fed, but concerns over a possible recession could probably slow down other world engines' development momentum, which would mean less demand from overseas markets that could in turn cripple US exports.

Taking into consideration all these factors, economists have reached common ground that a recession is just around the corner, but most of them struck an upbeat note at the same time, claiming even if a recession is inevitable, it would be a modest one.

They claim a recession is part of a natural economic cycle, and if taken as an opportunity of puncturing bubbles and adjusting imbalances, it will herald the next round of growth.

(Xinhua News Agency March 17, 2008)