Very Slow Recovery in Consumer Spending

The recovery in consumer spending in the aftermath of the Great Recession has been unusually slow, according to an analysis by the Federal Reserve Bank of New York in its Liberty Street Economics blog. Both nondiscretionary service spending (housing, financial, and health care) as well as discretionary service spending (everything else) fell off a cliff during the Great Recession and remain well below expected levels based on past trends.

• Real per capita consumer spending on discretionary services in the first quarter of 2014 was only 4.4 percent above the level of the Great Recession trough. In an average slow recovery, this spending would be 10.0 percent above the trough. 
• Real per capita consumer spending on nondiscretionary services in the first quarter of 2014 was only 4.1 percent above the level of the Great Recession trough. In an average slow recovery, this spending would be 9.2 percent above the trough. 

The lingering effects of the Great Recession still grip the nation. "It appears that households remain—almost five years after the end of the recession—wary about their future income growth and employment prospects," conclude the researchers.

Source: Federal Reserve Bank of New York, Liberty Street Economics, The Slow Recovery in Consumer Spending