Lord Abbett's Milton Ezrati takes a look at the pros and cons of the increase in consumer spending over the last few quarters. "Since late 2011, measures of consumption show acceleration in virtually all categories, despite the recent rise in gasoline prices. In one sense, this is good news for the economy, as it will push the pace of overall growth and, ultimately, prompt more hiring, which in itself will reinforce spending growth. But-and there is always a but-this new trend raises longer-term concerns. More liberal consumer spending can only take the economy so far. Because heightened levels of consumption will limit households' abilities to make needed improvements in their finances, any effort to boost outlays too far too fast would only threaten pinched finances at a later date, followed by spending cutbacks, say in 2014 or 2015, with all the recessionary influence that would impose on the economy in general."
