GDP on the Rise Will Result in Rising Consumer Confidence

By Sarah Cassidy ’17

UntitledThe growth of the United States’ GDP and other growth figures have recently indicated that the economic recovery may indeed endure. Although the past couple of months have been slightly disappointing for the economy, the overall trend in consumer confidence is positive and will continue to grow. Increased consumer spending and employment gains are expected to provide a powerful stimulus to GDP and keep the United States on an expansion path. This year’s fourth quarter GDP increase has been highlighted by increased consumer spending of goods and services, as American households picked up spending in the fourth quarter and have remained confident since. Gross domestic product expanded at a 2.2 percent annualized rate at the end of 2014, driven by the biggest gain in consumer purchases in four years. Bullish experts believe plunging energy prices will surge the economy through increases in consumer spending. Although there has been a noticeable decline in economic growth in early 2015, this will not necessarily undermine the projected long-term growth in the months to come.

An improving job market and low fuel costs will help sustain this surge in the economy. Increased consumer spending has been a huge driver of this improved economy as it accounts for more than two-thirds of national economic activity. The strong job environment and strong U.S. economy play a big part in consumer confidence. Household consumption grew at a 4.2 percent annualized rate in the fourth quarter, which is the most since 2010.  Better wages and salaries have also showed evidence of a promising future. Wages and salaries rose by $87.2 billion in the third-quarter, as well as payrolls rising 257,000 in January, overall increasing consumer confidence.

Though the positive growth of the United States GDP indicates that we are growing as a country, economic prosperity is not the primary determinant of a country’s success, as there are many other measurements that point to us lagging behind. According to the Social Progress Index, which ranks countries based on dozens of criteria, the U.S. ranks 16th. A higher ranking would mean these countries are building more prosperous societies and will prove to be better off in the long term. Economic growth as measured by domestic product does not really give us much information about citizens’ general well being. Well-being relies on a multitude of factors, including health and education, environment and culture, and the quality of governance and the community. As the well being of a country’s citizens improves, so does consumer confidence, which stimulates more spending, thus helping GDP.


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