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US consumption is very vital for the economic development not only of US but to entire world economy. And, within the US, the bulk of the growth comes from consumption.

We all know that the world economy recovery, particularly the export in highly dependent on US market. US un employment is already floating the figure of 9.7% which is the highest level for 26 years. About 216,000 people lost their jobs last month.

US economy is bound to recover but the process will be slow is also known but the thing which remains hidden is the depth of slow recovery.

The recovery will be slow and uneven, and it could take a decade or more for consumers to restore their sense of financial security to pre-recession levels. One has to realize that all the increase in US consumer spending was on  borrowed  funds.US banks have started picking up  borrowings but its very skeptical move and stringent regarding the collateral part of the loans. This will result to slow consumption growth. The recovery will be slow and uneven not only due to the high saving prone but also due to the stringent loans.

I will not get in to an ongoing debate but will accentuate one single point. That US and Uk helps other economies to earn dollar and maintain the fiscal position of each country. This will get effected to each and every countries economy. Economy here results to the sectors prune to export oriented. So this pressure will be their. Moreover the unemployment which will arise out of this particular sector will effect the domestic consumption of each country.

So the VERY SLOW recovery of US consumption and consumers will create and maintain the pressure on all countries.

The financial punters and speculators may present thousand of statements certifying that their country is not dependent on the US and UK consumers and the domestic reasons are enough for the growth and will replace the gap of export .But we all know that when the export of a country goes up the manufacturing also picks up. So when there is a very slow export what will be the effect of the manufacturing sector, their cash flow position. Obviously a downward trend. Also cut back in working capital requirements, cancelation of new projects and much more.

So what ever the speculators try to portrait the optimize in recovery the picture remains the same. A very slow growth in consumption. The punters and the speculators have earlier also in the  year of 2005-2007 have claimed that the US economy is going through the best of the times and many such statements. But here I would like to remind that the biggest crisis seeds were sown during these times 2005-2007.Why did not these speculators could not depict the seeds that were being sown at that point of time.

Stock market rally of each country cannot be used as the benchmark of consumption recovery.

The fundamentals remain the same. And that needs to be analyzed to see the HIDDEN PICTURE

Published by

Indraneel Sen Gupta
(Vice President-Business Development,Research & Product IFAN Finserv Private Ltd.(SPA Group Company) )
Category Shares & Stock   Report

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