Many countries have relied for growth on US consumer spending and investments in outsourcing to supply those consumers. If America s bubble economy is now tapped out, global growth will slow sharply.

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. Faster growth in consumer spending would also reverse the recent slowdown in GDP growth, providing the extra demand needed to create employment for the millions of Chinese who are leaving agriculture and the millions more who are graduating from the country s universities.

The US consumer, whose gluttony helped fuel growth throughout the world for more than a decade, seems finally set to go on a diet. In addition to tighter credit, falling home prices and high unemployment will continue to put a crimp on US consumer spending.

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. That implies that the 10 trillion wealth gain will raise the annual level of consumer spending by some 400 billion, or roughly 2.5 of GDP.

This deceleration was inevitable as China advanced from extreme poverty and technological backwardness to become a middle income economy powered by external trade and consumer spending. It was also desirable, because rapid growth was hitting environmental limits.

Within the first quarter, the monthly increase in real consumer spending accelerated from just 0.1 in January to 0.4 in February and 0.7 in March. That was faster than the 0.3 monthly growth in real personal disposable income during this period, highlighting the importance of wealth as a driver of spending.

But meeting the challenge will require vigorous growth from America s other 30 especially private capital spending. With the American consumer likely to remain on ice, the same 30 must also continue to shoulder the burden of a sluggish economic recovery.

Instead, they have cut back on spending. Gains in inflation adjusted personal consumption expenditure have averaged a mere 0.8 over the past five years the most severe and protracted slowdown in consumer demand growth in the post World War II era.

Second, this six quarter plunge was followed, from mid 2009 through early 2013, by 15 quarters of annualized consumption growth averaging just 2 an upturn that pales in comparison with what would have been expected based on past consumer spending cycles.

This is possible, however, only if the key growth inputs remain in ample supply, and if human made climate change is counteracted. If the supply of vital inputs is constrained or the climate destabilized, prices will rise sharply, industrial production and consumer spending will fall, and world economic growth will slow, perhaps sharply.

That's the consumer society, and it propels economic growth more than even technological change itself.

Over the last 18 quarters, annualized growth in real consumer demand has averaged a mere 0.7 , compared to a 3.6 growth trend in the decade before the crisis erupted. Never before has the American consumer been this weak for this long.

a Consumer spending on population activities covers only out of pocket expenditures and is based on the average amount per region, as measured by the World Health Organization (WHO) (2004), for health care spending in general.

But the growth fillip from public sector infrastructure spending can only be modest. Increasing infrastructure spending by a quarter, which would represent a huge administrative effort, would lift GDP growth by just 0.4 percentage points.

The core consumer price index, to be released next week, is expected to show a year on year increase of just 1.7 or even less, if the lower oil price feeds through from headline to core CPI. And real wage growth stands at less than 2 , which is below the level deemed necessary by the Fed to underpin a sustainable acceleration in consumer spending.

This development is critically important for consumer companies. Urban household spending in Africa is increasing twice as fast as rural spending, with urban per capita incomes, on average, 80 higher than those of countries as a whole.

Warnings about irrational market exuberance were largely ignored, especially as US consumer spending helped fuel strong growth across the global economy. Robust exports from Japan and Europe supported economic recovery and steadied investor confidence, providing, in turn, further export opportunities for newly industrializing countries, most notably China.

Stronger consumer spending, along with record high corporate profits, should boost investment spending further this year, as will re shoring of economic activity and an improving trade balance, owing to a decline in energy and labor costs in the US. Indeed, shale energy and big data analytics, two areas in which the US has a strong competitive edge, could be significant supply side game changers for growth.

Recent data on consumer spending in the United States have been terrible. Growth in inflation adjusted US personal consumption expenditures has just been revised down to 1.5 in the second quarter of 2012, and appears to be on track for a similarly anemic increase in the third quarter.

Introductory economics used to emphasize the Keynesian multiplier effect recipients of government spending (or of consumer spending stimulated by tax cuts or transfers) respond to the increase in their incomes by spending more, as do the recipients of that spending, and so on. Again, the multiplier is much more relevant under current conditions, because it does not fuel higher inflation and interest rates (and thus crowd out private spending).

It is the average annualized growth of US consumer spending over the past 14 quarters calculated in inflation adjusted terms from the first quarter of 2008 to the second quarter of 2011. Never before in the post World War II era have American consumers been so weak for so long.

Unfortunately, today s top policy priority is to address remote possibilities, whereas the urgent task at hand coordinating and implementing efforts to raise and sustain growth and job creation is being ignored. Meanwhile, cuts in social and welfare spending are only making things worse, as employment and consumer demand fall further.

Not this time. The record plunge in consumer demand during the Great Recession has been followed by persistently subpar consumption growth.

The economy is also set for a boost from surging demand for British goods thanks to the weak pound, which will offset some of the lower consumer spending.

In 2004, total consumer spending in Latin America and the Caribbean amounted to 0.94 trillion, with the figures being 0.55 trillion for China and 0.35 trillion for India.

Meanwhile, heightened international competition kept the lid on inflation, and interest rates remained low, giving a further boost to consumer spending and completing what looked like a virtuous growth circle. Even many of the poorest countries seemed, at long last, to be joining in, posting strong growth on the back of rising energy and raw material prices, renewed mining investments from abroad, and increasing fiscal revenues.

A key implication is the Internet s potential to play a significant role in the emergence of China s consumer society a critical structural imperative for a long unbalanced Chinese economy. With connectivity comes a national awareness of spending habits, tastes, and brands essential characteristics of any consumer culture.

In short, the downturn in house prices will not be limited to the US. And, on both sides of the Atlantic, that decline is likely to undermine consumer spending.

In short, the downturn in house prices will not be limited to the US. And, on both sides of the Atlantic, that decline is likely to undermine consumer spending.

Despite their declining incomes, households raised their spending in early 2012 at a rapid pace by cutting their saving rate to just 3.7 . Without further declines in the saving rate from this very low level, consumer spending will not continue to grow as robustly.

In the United States, the American consumer (who still accounts for 71 of US GDP) remains in the wrenching throes of a Japanese like balance sheet recession. In the 15 quarters since the beginning of 2008, real consumer spending has increased at an anemic 0.4 average annual rate.

Being a retailer, it is a play on the belief that this middle class that's growing will continue to grow, that the boom and the confidence in consumer spending will continue.

Meanwhile, private spending grew 3.9 year on year in 2013, the strongest rate in a decade, and the outlook for 2014 is promising. Improving household balance sheets imply stronger consumer sentiment.

What explains this slowdown in health care spending? How much of it is attributable to the weak economy, and how much is the result of changes in provider and consumer behavior?

Personal savings rates collapsed, and credit and mortgage debt soared, as households attempted to keep pace with the consumption norms of the wealthy. For quite some time, growing income inequality did not slow consumption growth indeed, trickle down consumption pressures fostered more consumer spending, more debt, more bankruptcy, and more financial stress among middle and lower income households.

So, first, we must restore the broad vision of global cooperation contained in the G 20 growth pact (which has since been downgraded to what the IMF now calls an in depth analysis of those countries identified as having large imbalances ). But a broader and deeper agenda is needed China should agree to raise household spending and consumer imports

From the first quarter of 2008 through the second quarter of 2009, real consumer spending plunged at a 1.8 average annual rate. In the past, when discretionary spending on items such as motor vehicles, furniture, appliances, and travel was deferred, a surge of pent up demand quickly followed.

However, barring any major economic bumps, the changes will have a positive impact, as capital allocation becomes more efficient. 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.

But the macroeconomic weakness in the US now goes beyond the decreased supply of credit. Falling house prices reduce household wealth and therefore consumer spending. Falling employment lowers wage and salary incomes.

Real GDP growth reached 4.1 in the third quarter of 2013, and fourth quarter growth appears to have been relatively strong, driven by a dramatic rise in housing starts and industrial production. The sharp increases in the prices of homes and equities contributed to a roughly 6 trillion rise in real household wealth in the 12 months ending in September 2013 a harbinger of increased consumer spending (at least by higher wealth households) in 2014.

It's a process of the production and reproduction of novelty, continually chasing expanding consumer markets, consumer goods, new consumer goods.

The third point is more diagnostic The shockingly anemic pattern of post crisis US consumer demand has resulted from a deep Japan like balance sheet recession. With the benefit of hindsight, we now know that the 12 year pre crisis US consumer spending binge was built on a precarious foundation of asset and credit bubbles.

Consumption, which accounts for about 70 of total spending, is constrained by high unemployment, weak wage gains, and a steep decline in home values and consumer wealth. The uptick in consumption in the last months of 2011 was financed by a decline in the household saving rate and a large increase in consumer credit.

Some countries have bucked the global trend. Indonesia, for example, has experienced accelerating growth, with rising business and consumer confidence boosting investment to almost 33 of GDP.

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. If that continues, it will lead to a faster rate of increase in household incomes and spending.