No economic recovery can sustain itself without rising wages and higher consumer spending power.

Consumer spending is plummeting, as expected.

Another indication of the role of wealth in fueling higher consumer spending is the decline in the household saving rate.

Raising rates could alleviate those fears, increasing consumer confidence and spending.

Raising rates could alleviate those fears, increasing consumer confidence and spending.

That, in turn, led to a rise in consumer spending, prompting businesses to increase production and hiring, which meant more incomes and therefore even more consumer spending.

Consumers can reduce spending on other discretionary items and use the savings to pay higher gasoline prices. Credit can also temporarily fill consumer budget gaps.

To raise consumer spending, the Chinese government must reverse both of these trends.

The resulting rise in household wealth boosted consumer spending and revived residential construction.

A higher level of consumer spending would raise the average Chinese family s standard of living, a primary component of what China s leaders now call the Chinese Dream.

The combination of large business investments in new technologies, combined with high levels of consumer spending, fueled a spending boom.

Normally, a cutback in optimism reduces interest rates, helping sustain investment and consumer spending.

Reduced household wealth would lead, in turn, to lower consumer spending, further depressing GDP.

Normally, a cutback in optimism reduces interest rates, helping sustain investment and consumer spending.

These disruptive effects would not only dampen production, but would undermine investor and consumer confidence and thereby limit both private investment and consumer spending.

And, on both sides of the Atlantic, that decline is likely to undermine consumer spending.

Without a fall in the dollar and the resulting rise in net exports, a higher saving rate and reduced consumer spending could push the US economy into a deep recession.

And consumption remains low only about 50 of GDP when government spending is included, and just 35 when limited to household consumer spending.

But these are impeding the consumer spending needed to boost economic activity and kick start growth.

But the resulting economic slack gives us the historic opportunity and need to compensate for low consumer spending with increased investment spending on sustainable technologies.

Many countries have relied for growth on US consumer spending and investments in outsourcing to supply those consumers.

Combine this with the continued fall in housing prices, and it is understandable that consumer spending remains depressed.

Meanwhile, the US cannot expect much relief from exports, given the global economic slowdown, or from consumer spending.

Reducing the share of income that Chinese households save could also raise consumer spending faster and more easily.

Past experience suggests that each 100 increase in household wealth leads to a gradual rise in consumer spending until the spending level has increased by about 4.

For example, higher incomes for women lead to higher household spending on educating girls a key prerequisite for faster long term growth.

Higher consumer spending and increased residential investment boosted demand for labor, resulting in a rise in payroll employment of 288,000 in April, up from a monthly average of less than 200,000 earlier in the year.

Meanwhile, cuts in social and welfare spending are only making things worse, as employment and consumer demand fall further.

At the same time, high oil prices have enabled higher social spending and infrastructure investment.

Meanwhile, higher public spending on capital investment and other special procurements will boost domestic demand.

But European Socialists remain divided German and British members oppose higher spending and fiscal homogeneity.

The failure of China to move more quickly to encourage higher domestic spending commensurate with its higher incomes added fuel to the fire.

Increased emphasis on household lending should also create a better balance in the economy between capital spending and consumer spending than was possible during the expansion of 2002 2004.

If not reversed, it will cause further cuts in production, employment, and earnings, leading to further reductions in consumer spending.

The US Congress and the Bush administration enacted a 100 billion tax rebate in an attempt to stimulate consumer spending.

Without a fall in the dollar and the resulting rise in net exports, a higher saving rate and reduced consumer spending could push the US economy into a deep recession. By contrast, the lower dollar makes reduced consumption consistent with full employment by shifting consumer spending from imports to domestic goods and services, and by supplementing this rise in domestic demand with increased exports.

Given all this, more deficit spending will only stoke fears of higher future taxes and inflation.

Warnings about irrational market exuberance were largely ignored, especially as US consumer spending helped fuel strong growth across the global economy.

Even though American pride and consumer spending would be dented, the damage to the world economy would probably not be huge.

With credit fueled consumer spending the engine driving GDP growth since 2010 now running out of steam, the economy is stagnating.

China s Consumer Communism

Today, the right wants tax cuts and the left, now reconstituting itself, may push for higher spending.

Consumers can reduce spending on other discretionary items and use the savings to pay higher gasoline prices.

For Greece, higher spending would have to be financed by lending from one or more official institutions.

But that spending power is unlikely to outweigh the higher labour costs at his firm, he says.