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Consumer spending accounts for two-thirds of US economy

More than two-thirds of the nation’s Gross Domestic Product derives from everyday stuff like dining out, buying a new shirt or visiting the dentist. About 14 percent stems from private investment, for instance companies purchasing new machinery or building new factories. And the rest comes from government spending on things like bridge building, schools, and defense.

And if consumers did spend less, and saved more, that could eventually boost GDP in other ways. That’s according to Louis Johnston, an economics professor at the College of St. Benedict and St. John’s University.

Johnston says if consumers started saving instead of spending, GDP could suffer a decline in the short run.

“But in the long run, it would be useful because that saving would be put to uses like building plants, buying equipment, doing the things we need to increase our productive capacity in the future,” Johnston says.

And that’s because the money you or I stash away in a bank account or mutual fund, can be used to finance a local business’s operations.

Consumer spending accounts for two-thirds of US economy Minnesota Public Radio, MN – 49 minutes ago It's now at its highest point in decades at nearly 71 percent and, perhaps not surprisingly, credit card debt has climbed along with it. …

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Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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