Tags: Webman | consumer | spending | stagnant

Oppenheimer’s Webman: Stagnant Consumer Won’t Power Economy

By    |   Monday, 25 June 2012 04:22 PM

Consumer spending has little room for growth over the next three to four years, says Jerry Webman, chief economist at Oppenheimer Funds.

That’s a problem because consumer spending accounts for about 70 percent of the economy and thus plays a key role in generating growth.

The consumer sector is “growing very slowly,” Webman tells Yahoo. Personal consumption spending averaged only a 0.3 percent gain in the first four months of the year.

The big problem for consumers is slow job creation, he says. “If you’re going to increase consumption, . . . you have to employ more people doing more constructive things.”

Numbers like the paltry 69,000 gain in May payrolls just won’t cut it, Webman says.

And it’s not something policymakers can fix. "There's a long-term unwinding [of consumer debt,] . . . and until we're through that, we're not going to see a rapid expansion of consumption."

Economic history indicates that seven lean years follow a financial bubble, Webman says. That would indicate recovery should begin in earnest in 2016.

On the plus side, “housing has probably bottomed,” he says. “That suggests some people have money for consumption.”

The Commerce Department reported Monday that home sales hit a two-year high in May.

“It’s another sign of life in the housing sector,” Brian Jones, an economist at Societe Generale, tells Bloomberg. “But we’ve got miles to go before we get back to normal.”

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Monday, 25 June 2012 04:22 PM
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