Shop ‘til you drop

You’ve been told the American consumer is in trouble. You’ve been lied to.

Nothing can stop the American consumer. Yanks continue to spend more on televisions, clothes, food, holidays, and anything else they’re asked to open their wallets for. In the past year, real personal consumption expenditures rose 3.3%. Of that extra consumption, durable goods led the way. It rose 8.5% in the past year. That’s much faster than the 2.3% growth in services spending and 3.1% growth in nondurables.

Pundits have claimed that the consumer has been in trouble for the last few years. Declining savings rates meant they had less money to draw down on. And rising interest rates meant borrowing was unaffordable. But this prediction missed the mark. The consumer has been strong, much to the disappointment of the punters mentioned above. So, why has America’s consumption held up so well? In short, shoppers have plenty of capacity and willingness to borrow and spend.

Shoppers have spent more because they’ve earned more. According to data from the US Bureau of Economic Analysis, real d…