The United States Economy
The American Consumer
Why household spending makes up most of the U.S. economy, how Americans finance it, and why the world watches U.S. consumer data.
Consumer spending by households makes up around two-thirds of the U.S. economy, a higher share than in many other countries. American consumers are so important that their spending influences factories and exporters around the world.
What Americans buy
Most consumer spending goes on services, such as housing, health care, transport, recreation and dining out. The rest goes on goods, both durable goods like cars and appliances and non-durable goods like food and clothing.
How spending is financed
Americans finance spending through wages, savings and credit:
- Credit cards are widely used, and total credit card debt exceeded 1 trillion dollars in 2023.
- Mortgages are the largest form of household debt.
- Auto loans and student loans are also large.
The U.S. household saving rate has generally been lower than in countries like Germany or China, though it jumped during the pandemic as spending opportunities fell and government support arrived.
Why the world watches
Because U.S. consumers buy large amounts of imported goods, their spending affects exporters in China, Mexico, Europe and elsewhere, including India. Monthly data on retail sales and consumer confidence in the United States move financial markets worldwide.
Wealth effects
When house prices and stock prices rise, American households feel richer and tend to spend more. This is called the wealth effect. When asset prices fall, as in 2008, spending can drop sharply.
Retailers in the United States earn a large share of their annual sales between late November and December, including Black Friday and the holiday shopping season. Manufacturers in Asia ramp up production months earlier, and shipping companies fill container ships to meet this demand. A single season of American shopping ripples through global supply chains.
Strong spending supports growth, but if it relies too much on debt or asset bubbles, it can end abruptly. Sustainable growth needs rising incomes, investment and productivity, not just spending.
- Consumer spending makes up around two-thirds of the U.S. economy.
- Most spending goes on services, financed by wages, savings and credit.
- U.S. credit card debt exceeded 1 trillion dollars in 2023.
- U.S. consumer demand influences exporters and markets worldwide.
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