By now you have heard that the near-term outlook for the U.S. economy depends on the confidence level and spending behavior of the American consumer. The other major components of the GDP calculations — business investment, government spending and foreign trade — are either maxed out or in a state of cyclical decline at the present time.
Consumers, on the other hand, are fully employed with rising incomes. They also have relatively low levels of household debt, which has been accrued at low interest rates. And most importantly, they account for more than two-thirds of all U.S. economic activity. The conventional wisdom is that consumers are flush and relatively content at the present time. Therefore, they will continue to raise their spending levels at a pace sufficient to offset the lack of growth in the other segments of the economy. This situation will prevail for the foreseeable future.
I don't always hold with conventional wisdom, but this time I am going along with the consensus. There is no question the rate of economic growth in this country is slowing, and the data suggests many sectors, particularly manufacturing, have been slowing for the past year or so. But the data also indicates the current economic cycle has hit a near-term bottom, and overall activity should now start to expand gradually.
A good example of this pattern is the trend in U.S. production of appliances. I admit to having a soft spot for the data from the domestic appliance industry for several reasons. First, it is a reliable indicator of consumer spending activity. If it is a good time for the appliance industry, then it is very likely a good time for everybody. Second, it represents a large end market for plastics products. Finally, and perhaps most important given the current business environment, this industry provides great insight into topics pertaining to supply chains, tariffs and foreign trade policy.