Saturday, February 15, 2014

The Middle Class Cull = Greater Economic Cyclicality

Interesting stats in this New York Times piece showing that 60% of consumption is made by the highest 20% in income.  So the top 20% generate more consumer spending than everyone else combined – by a wide margin.  The top 5% in income generate almost 40% of consumption!

Obviously, spending for the top 5% is basically all discretionary whereas spending for the bottom 80% is majority non-discretionary.  So the wealth effect has become magnified and economic growth should experience greater variability.

Also, of course, as the article lays out, any businesses targeting the middle class are getting crushed.

http://www.nytimes.com/2014/02/03/business/the-middle-class-is-steadily-eroding-just-ask-the-business-world.html?_r=0

 

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