According to data published on April 14, 2011 by the U.S. Bureau of Economic Analysis, consumers are spending money and corporate profits are up. In corroboration, Credit-Land.com economist’s research and comparative analysis focused on sheading a light on the U.S. consumer behavior in recent years, shows that real gross domestic product increased 3.1% in the fourth quarter of 2010. According to the economic bureau, this marked the sixth consecutive quarter of growth. Consumer spending increased 4%. This was the biggest percentage increase since the fourth quarter of 2006.
Consumers are the biggest driver of the U.S. economy by far. Their spending, in fact, makes up 70% of it. When consumers spend money it stimulates businesses, who hire more workers, who then have money to spend on more goods, and the virtuous cycle continues. One of the reasons the recovery has been sluggish is that with unemployment staying high, more Americans have been forced to cut spending.
Increasing Price of Goods
While spending is increasing, so are the prices of goods, which increased by 2.1% in the fourth quarter of 2010, compared with a 0.7% increase in the third quarter of 2010. At this point, it does not seem to be slowing consumers down since their spending continues to increase in the face of rising prices. They have more money to spend — real disposable income rose 1.9% — and saved only 5.6% of that disposable income, down form 6% in the third quarter.
In a MasterCard survey in December 2010, 61% of customers said they were not planning on cutting back on spending in 2011. Of shoppers earning $100,000 to $150,000, 73% said they would not cut spending. So far, consumers are keeping true to their word.