Washington Post Columnist Robert Samuelson today outlined the demographical and economic trends behind the current slow down of consumer spending. While we are all familiar with the current credit crunch, he also points out that natural “life cycle” spending will also contribute to a consumer slow down as the US population continues to age.This is a very somber but important insight as people borrow and spend more in their 30s and 40s and slow in their 50s and 60s as they borrow less and incomes decline.
As you can see in the chart based on US Census Bureau data, a substantial percentage of the US population will be in the 50+ ranges moving forward. Real estate and investment income can prop up incomes and increase spending as it has for much of the last decade, but the likelihood of that happening in the next two to five years is slim. I would assume that wealthy older Americans should have conservatively constructed portfolios in the current trough and housing doesn’t look
to recover anytime soon either. For an even gloomier look into our economic future, look at where AARP says older American’s income comes from as of 2004 – Social Security…So what does this mean for politics? Samuelson goes on to say that “The ebbing shopping spree may challenge the next president in ways that none of the candidates has yet contemplated.” While all candidates may have contemplated a slow start to their term, have they dreamt about what it will feel like to bear the brunt of public frustration in a long-term recession? This sets the stage for a likely four and out scenario.
(charts from wallstreetexaminer.com/blogs/winter/?p=362)
