An Associated Press-GfK poll conducted in September and released today found that 91 percent of more than 1,600 adults polled viewed the economy as an important election issue, the highest percentage among several issues including healthcare, Ebola, gay marriage and abortion. The poll results come as the U.S. government released its third quarter GDP report that showed the US grew 3.5 percent between July-September, fueled by stronger business investment, increased exports, and the biggest jump in military spending in five years. CCTV America’s Karina Huber reports.
Consumer spending makes up over 70 percent of U.S. economic growth, and it rose 1.8 percent in this quarter. After the recession, Americans pulled back on spending and tried to pay off what they owed. Household debt in the U.S. is considerably lower than it was just before the 2008 financial crisis.
But now Americans are back to spending on credit, but not to buy homes. The U.S. Federal Reserve says that kind of debt has fallen 22 percent since 2007. What Americans are financing now are cars, consumer goods, and most notably, education. Student debt currently tops $1.2 trillion.
“You have a lot of student loans going to people who ultimately won’t graduate college, simply because they can’t stick it out. And the question is how are those people going to pay their debt,” said Daniel Alpert, a managing partner at investment bank Westwood Capital.
Alpert doesn’t believe the student loan market is big enough to cause another U.S. recession if the market collapses, but he said it will weigh on the economy for a while.
“Because you have an entire demographic of people who would normally become homebuyers, car buyers, consumers of various types, who are going to be buried under a huge, huge avalanche of debt,” he said.
By some forecasts, consumer spending on new cars and trucks is on pace to set a new record in 2014, much of it is fueled by debt Experts say pent-up demand is causing the boom.
“The average car age is about 11 years, so it’s a record. You do get to a point where you’ve put enough duct tape on the car, you actually have to go and get something new,” said Steve Blitz, chief economist of ITG Investment Research.
Blitz says auto debt is not a problem so long as people don’t buy more than they can afford. The most worrying sign about rising U.S. household debt is a rise in credit card debt, Alpert added.
“Very recently we’ve seen this trend of people incurring more and more revolving credit card debt as a way of making ends meet as wages continue to decline on an inflation-adjusted basis. That’s troublesome,” Alpert said.
An increase in credit card use was once seen as an indication of consumer confidence, but after more than a decade of wage stagnation, some Americans are relying on credit just to pay for basic needs.
Housing expert Jeff Tanenbaum of Halstead Property joins CCTV America to discuss the current state of U.S housing.
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