Financial shows love to talk about consumer spending because that is what they consider to be the main signal of a strong and healthy economy. I believe this to be true to a certain point but there are some questions that aren't brought up often enough by the typical financial pundits you see on tv:
The answers to these questions help determine just how strong our economy really is.
Just focusing on how retail stores are doing during the holiday season doesn't tell the whole story. If consumer spending helped big retail stores make a lot of profit in one year but during that same time the average consumer went deeper into debt without any savings to fall back on, is that the sign of a good economy?
Don't get me wrong, I understand that there are millions of people employed in the United States by small to large retail companies and that more consumer sales translates to better job stability for retail employees. Still, there is a unique balance between savings and spending that doesn't get enough attention on financial shows in my opinion. The private concerns of a potential consumer may just mean more to their own well-being than the latest profit report of Wal-Mart or Target.
Between rent and mortgage payments, the needs of their children or their parents, wondering if their salary will be enough to handle their weekly expenses.
These things are more important to most people than whether or not the stock prices of retail companies are high.
Consumer spending while important, doesn't give a complete picture of the economy.
A person's ability to save, preserve their purchasing power and get healthy returns on their money gives a better all around view of the economy. This is because the consumer spending that does take place will ideally come from a stronger, more stable foundation.
Consumers would be less dependent on loans or credit when they make purchases so they wouldn't feel as overwhelmed under growing debt as many consumers today do. They also wouldn't have to wait until next Friday (payday) to get what they want or need.
Without needing to pay off as much past debt means more income and capital can be used however a person sees fit to maintain or improve their lifestyle.
Retail and other businesses need our money to continue to exist and grow, that is understandable, no hard feelings there.
We just shouldn't go too deep down the debt hole to keep their annual sales reports positive.
Consumer Debt -- Huffington Post - April 20, 2014
Less Consumer Debt Defaults -- CNBC -- June 16, 2015
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Observing the Cause/Effect cycle of economic systems.