Consumers are a lot more cautious about their spending than they were before the recession, Atlanta Federal Reserve Bank President Dennis Lockhart said on Monday.
This more subdued approach to spending, even if negative for short-term economic growth is healthy in the long-run, helping address international imbalances characterized by high savings overseas and excess spending at home.
Consumer spending has been growing more slowly relative to income than it did before the recession, Lockhart told an audience of business executives at the Palm Beach Strategic Forum. I expect that this more measured consumption behavior is likely to persist.
In the past, Lockhart has cited such caution as an impediment to the economic expansion. But on Monday he pointed to the advantages of such a shift in behavioral patterns.
A less consumption-dependent economy will help rebalance the country's external accounts, Lockhart said.
A similar adjustment is needed -- and already under way -- for a highly indebted U.S. government sector, Lockhart said.
The public sector in the United States must stabilize its finances and reverse the accumulation of debt that has accelerated in recent years, Lockhart said.
In Washington, Democrats and Republicans continued to wrangle over the budget and the Congressional debt ceiling, a battle that threatens a shutdown of the federal government.