By Stella Dawson–It’s up to the consumer to drive the U.S. economy and lift world growth in 2012, and the outlook is far from encouraging.
Over the past three and half years, growth in U.S. consumer spending has averaged a paltry 0.2 percent adjusted for inflation, the weakest in the post-World War II period, Morgan Stanley says. While the employment picture is gradually brightening, wage growth is going in the opposite direction, keeping a lid on consumer behavior. Over the past year, pay for blue-collar workers adjusted for inflation fell 12 U.S. cents from the previous year, according to the Bureau of Labor Statistics. That was the steepest decline since the stagflationary days of 1980. Pay for all workers has fallen 16 cents in 2011 in real terms. Consumer buying power, modest over the holiday season, remains constrained by heavy debt loads. Total U.S. household debt as a percentage of disposable personal income is down from its 2007 peak at 130 percent, but it remains well above its 1970-2000 average of 75 percent. As a result, Stephen Roach, non-executive chairman of Morgan Stanley, sees U.S. consumption remaining anemic for years to come. That will place a drag on global growth, especially in Asia, a big manufacturer of U.S. consumer goods. “With retrenchment and balance-sheet repair only in its early stages, the zombie-like behavior of American consumers should persist,” Roach said.