US Consumer Spending Rises At Fastest Pace in Seven Years
Personal consumption in our economy accounts for roughly 70 percent of our gross domestic product. And the consumption economy seems to be kicking back in, as “US consumer spending recorded its biggest increase in more than six years in April.”
Consumer spending went up 1 percent last month, in large part due to the “strengthening labor market, which is steadily pushing up wages.” In the words of our plutocratic overlord Nick Hanauer, “when customers have more money, businesses have more customers.” You don’t say!
This virtuous cycle of consumption and demand is known by many:
Economists generally accept the idea that Americans who make more will be prone to spend more. While consumer savings preferences don’t always add up to an exact 1-to-1 ratio between income and spending, it’s generally believed that compensation gains ultimately help stimulate consumption. Perhaps unsurprisingly given the month’s solid spending totals, disposable personal income – or Americans’ earnings after taxes – climbed 0.5 percent last month for the metric’s best showing since January.
An economy’s purpose, after all, is to provide solutions via market forces for citizens. Naturally, a citizen is going to be more active in the economy if he or she has enough money to participate in the economy. That’s why today’s news is good news. With the velocity of money in our society so beleaguered, any uptick in consumer spending is cause for celebration.