US consumption to remain muted for another year

The US economic recovery is well under way, but our estimate is lower than the consensus view.

Historic data shows after a financial crisis private consumption typically remains subdued for at least three years. We are now two years past the peak in output for the preceding cycle, suggesting consumption will remain muted for at least another year. US companies have shown themselves capable of rapid adjustments to their cost bases. Among the top 1,500 US stocks, selling, general and administrative expenses have been cut at a faster rate than at any time since data first became available. This ruthless focus on costs has helped to cushion profit margins, which have fallen by less...