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Consumer spending drives growth

Ignore bad headlines about auto sales, energy, trade, transportation or manufacturing, an economist said Tuesday in Findlay. The economy is fine and likely will remain so.

“Things are fundamentally pretty stable right now,” said Elliott Eisenberg, chief economist for Econ70.com. He presented his economic outlook to the business community at a presentation on the University of Findlay campus.

The key driver is consumer spending, which accounts for about 69% of gross domestic product.

“As (consumer spending) goes, generally so goes the economy,” he said.

The rate of growth in consumer spending has declined a bit, but consumer spending still is growing at a decent level, Eisenberg said.

So people should not worry about reports of a decline in the growth rate of gross domestic product — from 2.9% in 2018 to about 2.3% last year and a projected 2% this year — he said.

A growth rate of about 2% would be normal.

“This is fundamentally going to be a decent year, kind of like it was in (2011), ’12, ’13, ’14, ’15, ’16, and ’17,” Eisenberg said. “It’s sustainable growth.”

Still the rate of growth in gross domestic product does not tell the whole story. There are some areas of concern.

He called mounting student loan debt a “real problem.”

It won’t cause a recession tomorrow, but over long periods of time high levels of indebtedness for younger students, younger kids and younger households will delay “a whole lot of things” for many: marriage, home buying and having children, Eisenberg said.

Population growth can be a “huge” contributor to economic growth. The concerning news is that population growth rates have slumped from decades ago. The rate of growth in both births and immigration has slowed.

The U.S. population grew at a rate of 0.48% in 2019, the lowest rate since 1918, the year of a flu pandemic, he said.

The slower rate of population growth also is likely linked to lower rates of wage growth and lower inflation, Eisenberg said.

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