Based on reasonably healthy third-quarter growth in U.S. GDP of 4.1 percent, a stronger housing market, continued steadiness in auto-sales growth, a slowly receding unemployment rate and signs of new bullishness from American manufacturers, many prognosticators are laying bets on a relatively robust economic performance in 2014. There is more confidence that the U.S. economy will sustain any early burst throughout 2014 instead of starting rather strong out of the gate and then faltering as it did each of the last two years.
But there are plenty of reasons for skepticism as well. Many of them are lodged in the stubborn fact that American consumers aren’t going merrily along on the accelerating bandwagon of economic optimism. Christmas-shopping spending was lackluster. The U.S. Consumer Confidence Index fell to a seven-month low in November, but rebounded in December, up 78.1 percent from 72.0 percent.
Some of the reasons for consumers’ reluctance are profoundly rooted in longer-term concerns. Labor-force participation rates remain depressed, meaning that many would-be paycheck earners remain stymied. More consumers reportedly are engaged in “reverse shopping” in which they return unwanted Christmas gifts for cash; McDonald’s has even urged its low-income workers to dig themselves “out of holiday debt” by cashing in their holiday haul. Insurance-policy sticker shock and overall confusion accompanying Obamacare also are bound to confuse and even depress many consumers in the new year.
Thus, McKinsey recently found that “the average American is more price conscious than they were a year ago and … more people are living from paycheck to paycheck. Consequently, many Americans are tightening their wallets and actively changing their shopping behavior in order to save money.” This includes even many upscale American consumers. “As I talk to my peers in other retail categories, they say they are seeing slower same-store sales growth too, so I think we may see less robust growth across all of retail in the coming months,” Whole Foods Market CEO John Mackey said recently.
Such is the silent malaise among U.S. consumers that economists note how even a rebounding America is “giving less support to global growth than in the past,” according to Bloomberg Markets Magazine. This situation could be exacerbated by a U.S. population-growth pace that, from mid-July 2012 to mid-July of this year, ranked as the slowest rate of increase since the Great Depression, largely due to various forms of economic discouragement.
At the same time, as some CEOs are observing, emergent economies have become uneven guarantors of their own growth. “China has slowed and is being remade – to what, we’re waiting to see,” said Dow Chemical CEO Andrew Liveris. Brazil’s rapid growth is devolving into a much slower mode in part due to a rising problem of slumping labor productivity.
In fact, Unilever CEO Paul Polman, on the way to announcing a massive cut of about 2,000 jobs yet in December, said that the economic slowdown in emerging markets is here to stay for “a few years” as many countries need to enact structural reforms to adjust to new conditions after the boom of recent years.