10
FORTUNE.COM // NOVEMBER 2019
a looming recession.
Unperturbed, they’re
spending with gusto—
more per capita than
ever in history, even
after adjusting for
inflation. Their spend-
ing has long been the
largest component of
America’s economy;
over the past several
years, consumption
has accounted for 67%
to 69% of U.S. GDP.
But lately, consumers
have been outdoing
themselves, contribut-
ing 85% of America’s
GDP growth over the
past five years. Fan-
nie Mae’s economists
recently concluded,
“Consumer spend-
ing remains the most
important force
driving the continued
expansion of the U.S.
economy.” Shoppers
are the heroes of this
record-setting expan-
sion, 10 years old and
counting.
Those who remem-
ber back more than
10 years may shudder.
Frenzied consumption
is exactly what fueled
the ebullient growth of
2003 to 2007, before
it all collapsed into
the worst recession
of the past 70 years.
But today’s consumers
aren’t the debt-crazed
shopping fiends of
those days. Just the
opposite: Financially,
they’re model citizens.
Before the last reces-
sion, household debt
climbed to 99% of
GDP; today, it’s only
76%. As the economy
boomed in 2006 and
2007, the personal sav-
ings rate fell, bizarrely,
to zero; today, it’s a
prudent 8.1%. “The
severity of the last
recession has altered
consumers’ behavior,”
says Lynn Franco, who
oversees the Confer-
ence Board’s consumer
confidence survey.
“They were scarred.”
With households
nowhere near tapped
out, unemployment at
a 50-year low, and real
wages rising, it seems
consumers could com-
fortably keep up their
heroic GDP-driving
performance indefi-
nitely. Yet history says
they won’t. The great
question for the U.S.
and world economies is
whether U.S. consum-
ers’ mood will sour,
and specifically what
might spook them into
pulling back.
Job weakness is
the No. 1 candidate,
frightening even people
who are still working.
“A couple of really bad
employment numbers
would probably lead to
a decline in confidence
and spending,” says
Mickey Levy, an econo-
mist at Berenberg
Capital Markets and
an adviser to several
Federal Reserve banks.
An escalating trade
war could also dent
the consumer psyche.
The latest surveys by
the Conference Board
and the University of
Mich igan—conducted
before President
Trump announced a
potential trade deal
with China—asked re-
spondents open-ended
questions about what
worries them; the top
answers were tariffs
and trade wars. “The
weakest point now is
that tariffs will drive
up consumer prices,”
says Richard Curtin,
chief economist for
Michigan’s consumer
sentiment surveys. “It
could be a sobering ex-
perience for consumers
going to the store and
U.S. HOUSEHOLD DEBT
2005 2010 2015
Q2 2019
$13.86 TRILLION
8
10
12
$14 trillion
70
80
90
100%
Q1 2019
76.3% OF GDP
TOTAL DEBT AMOUNT
DEBT AS A SHARE OF U.S. GDP
AS FOR ORDINARY CONSUMERS—THE MASS OF BUYERS
WHOSE DAILY DECISIONS STEER THE ECONOMY—THEIR
VIEW MAY BE DARKENING AT THIS MOMENT.
THE OPTIMISTIC BUT
RESPONSIBLE CONSUMER
