Consumer growth doesn't tell the whole story

President Obama

Truth be told, whether the United States is close to emerging from recession remains a mystery. Wall Street has given reason for optimism but Main Street says otherwise, and now even President Obama has gone public in his fears over heading for another wave of recession even if we do leave this one in the near future.

However US consumer spending rose more than expected in October, raising hopes that the economic recovery is continuing despite stubbornly high unemployment.

Consumer confidence is widely considered one of the main driving forces behind economic recovery in a post recession climate, and in the US consumer spending accounts for more than two-thirds of the US economy.

"Don't count consumers out, they are making a contribution to the recovery," said analyst Ken Mayland, president of ClearView Economics.

The economy grew at an annual pace of 2.8 percent

The minor transactions at the low end of the economic scale are vitally important to the US economy, as reported in a previous article on Business Management that covered the role of small business spending in America's economic recovery.

But neither a rise in consumer spending nor the fact that small businesses are starting to borrow again tell the whole story. The most recent official figures showing that the unemployment rate in the US rose to 10.2 percent in October, the highest rate since April 1983, and the US economy grew by far less than originally forecast in the previous quarter, according to revised official figures, reports the BBC.

The latest estimate said the economy grew at an annual pace of 2.8 percent. That's compared with the 3.5 percent the Department of Commerce initially forecast earlier this month.

Christmas is coming

All signs of economic growth, however, were helped by a substantial government stimulus package, including a scrappage scheme to boost car sales and higher investment in residential property. The figures still indicate the first quarterly growth in GDP since the second quarter of 2008, and appear to have put an end to the worst recession in the US for 70 years.

With Christmas upon us, the responsibility for consumer spending to keep dragging the US into a recession free 2010 will grow, and one must hope the America shoppers are still there and that the stimulus fund hasn't distorted figures too much.

But one must try to take what they can from the figures and remain optimistic, even when the President himself is urging caution.

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