Analysis: Americans to face tougher 2013 on rising prices, taxes

Thu Oct 25, 2012 7:25am EDT
 
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By Edward Krudy

NEW YORK (Reuters) - Consumers will have to dig deeper into their pockets next year to pay for costlier healthcare, more expensive grocery bills and higher taxes, an extra drag on the country's already slow-moving economy.

The additional outlays look set to test the resilience of consumers, whose spending accounts for around two-thirds of the U.S. economy.

"We think it's going to be a difficult six to nine months," said Scott Hoyt, senior director of consumer economics for Moody's Analytics. "If anything, conditions are likely to get worse, particularly at the start of the year."

The strength of consumer spending has surprised some economists, given unemployment near 8 percent and anemic wage growth. Consumer spending has cushioned the blow to the United States from slower foreign demand for its goods.

U.S. households have shed about $880 billion in debt since the peak in the first quarter of 2008, according to Federal Reserve data. That has put many consumers on a path back to financial health.

But an expiration of payroll tax cuts in early January and a spike in food prices could wipe 0.8 percentage points off U.S. economic growth next year, according to some economists.

The economy is now expected to expand 2 percent in 2013, down from 2.1 percent in 2012, a Reuters poll showed.

Consumer groups are noting caution on the part of households when it comes to such things as taking on more debt, retirement savings and gasoline prices.   Continued...

 
A shopper walks down an aisle in a newly opened Walmart Neighborhood Market in Chicago in this September 21, 2011 file photo. REUTERS/Jim Young/Files