ISAS Briefs

As the recession in the United States (US) deepens, it is apparent that America’s traditional role as the world’s ‘consumer of last resort’ is now at stake. Consumer confidence in the US has plunged, owing to the ‘wealth effect’ following the burst of the assets bubble. The McKinsey Quarterly reports that the two forces which until recently turbocharged the US consumer spending – growing household debt and a falling savings rate – are now following a reversal trend. American consumers have accounted for more than three-quarters of its gross domestic product (GDP) growth since 2000 and for over one-third of global growth in private consumption since 1990.