U.S. Economy – Counting on Consumers

If the U.S. economy manages to sustain its record-breaking expansion into 2020, it will be because U.S. consumers didn’t lose their nerve despite all the talk of recession.

- By Reade Pickert and Matt Townsend

Consumer spending makes up almost 70% of the U.S. economy—a higher percentage than almost every other country. (In China, it accounts for about 40%.) And while the propensity of Americans to shop has long been crucial for economic growth, it’s particularly the case now.

That’s because companies have pulled back, hiring at a slower pace and postponing long-term investments. In the second quarter, business spending declined for the first time since 2016. Manufacturing, which was booming two years ago, is constrained after contracting earlier this year. A good deal of the blame appears to fall on President Trump’s trade wars, which have increased costs and created uncertainty for businesses. The strong dollar hasn’t helped. Also, political risk is on the rise as the country heads into an election year with an incumbent facing possible impeachment.