This term, which sounds silly taken literally, acknowledges the importance of the US consumer to the global economy ever since the US became the world’s largest economy in 1916. US GDP is about 68% consumption, which is a bigger number than for other large economies. Chinese consumers, for instance, only power 37% of China’s economy, EU consumers only drive 57% of EU output while the ratio is 60% for Japan. Given the size of the US economy to the world economy, the US consumer is responsible for about one-fifth of global output. Thus, US consumer spending is a key determinant of global growth. The promising news for investors is that US consumers are spending for various reasons. That should encourage optimism that the world economy will expand for a while yet. Relying on the US consumer to drive the global economy is not without drawbacks, however. And it can’t go on forever. (VIEW LINK)
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