Consumers are not behaving according to the plan

Disposable income growth has fallen close to 2% after surging to above 4% in late 2010. Consumer spending has been declining to below 4% from stronger numbers last year. Sentiment is also declining. Consumers have started to internalize the deficit rhetoric and adjust their behavior. The consumer has usually been the savior for the US economy but that spending was driven by cheap credit. The credit boom is over and consumer want better balance sheets. The result is slow growth that will not change in the near-term. With the risk of higher taxes and health costs as well as smaller pension, consumers just do not want to spend.