Consumer spending overemphasized, analyst says

   Consumer spending in the United States is more than two-thirds of the economy. At least that’s what we’re taught to believe by most economists and journalists writing or talking about it. In fact, most analysts now put consumer spending at 70 percent.
   That’s a fallacy, according to one contrarian.
   Scudder Smith is principal consultant for infrastructure developer Parsons Brinckerhoff and an expert on the economics of port infrastructure and goods movement. He is part of a team developing a study for the U.S. Maritime Administration about the potential market impacts from the expansion of the Panama Canal now underway.
   He says that when you add up all the positive components of GDP you get a total output that is closer to 120 percent. The reason is imports, which government statisticians subtract from the economic growth numbers because they don’t represent anything produced by American workers. Imports represent about 16 to 17 percent of the 20 percent overage.
   If you adjust for imports, consumer spending is actually about 60 percent of GDP, he explained during a panel discussion on shifting trade patterns at the Transportation Research Board’s mammoth annual conference in Washington the third week of January.
   “It’s illogical to say consumer spending is 70 percent of the total when in fact everything else is also bigger,” he said in a follow-up conversation. Consumer spending actually went up during the recession as a share of total output because housing and non-residential investment fell so far, he told me.
   The reason why it’s difficult to get an accurate read on the portion of the economy driven by consumers is that statisticians can’t allocate imports to any particular category when they are subtracted from the GDP calculations, Smith said.
   “Consumer spending may actually have gone down over time, but you can’t figure out how much of that is actually imports,” he said.
   Smith is no macro-economist, but before you dismiss his analysis you should consider that he was one of the first to say transpacific containerized imports would flatten in late 2007 before anyone knew a recession was coming. And he also first-guessed that container volumes would invariably slow from the red-hot annual growth rates of 10 percent or more last decade because outsourcing from developed countries had nearly finished its course.
   Post-recession, analysts now see global TEU volumes growing in the mid-single digit range for the foreseeable future. — Eric Kulisch