The previous post discussed the recent upturn in the personal saving rate and the prospects that it will head even higher as the economy emerges from recession. In light of the recent increase in the saving rate, the following chart, which plots personal consumption expenditures as a share of gross domestic product, may seem anomalous.
Consumer spending is unlikely to lead the economy out of the current recession.
Here is a chart of annual taxable retail sales in the city of Seattle for the years 1994 to 2008. To remove the effects of inflation, we have adjusted spending to 2008 values using the BLS's Seattle Consumer Price Index.
An editorial in the current issue of the Puget Sound Business Journal promotes our recent Policy Brief, “Seattle’s Lost Decade”: