Americans are making progress in working down their heavy debt burden, but are struggling to break out of another funk holding back the economy: their deep pessimism.
Some economists point to a big drop in household debt as a sign that American consumers - once considered the driving force of the world economy - are primed to return to more spendthrift ways.
But standing in the way of a stronger recovery, and possibly President Barack Obama's re-election as well, are unprecedented levels of concern that better days may not lie ahead.
Research suggests that economic growth will suffer from a sinking feeling among consumers that their incomes will continue to lose ground to inflation. Even though households are digging themselves out of debt, the painful 2007-2009 recession could leave a lasting scar on their willingness to spend.
"Given people's expectations, the outlook going forward does not suggest much upside for consumption," said Jeff Greenberg, an economist at Nomura in New York. "A lot of people will be radically different consumers."
Polls show record levels of pessimism about future income despite slow improvements in the economy. Indeed, Gallup surveys have found Americans are even gloomier about their finances now than they were during the recession's darkest days.
Read the rest at The Huffington Post
by Reuters
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