TL;DR: annual US GDP declined 2.9% because consumers spent less. In fact, they are not yet spending at rates anywhere near the rates at which they were spending before the financial crisis in 2008.
When consumers spend less, businesses in the aggregate sell less of everything, because every dollar spent by a consumer is a dollar earned by someone else -- usually a business.
Before the financial crisis, consumers borrowed aggressively to finance consumption, like drunken sailors... but unlike the financial sector, they never got a bailout. They were forced by the circumstances to follow Steve Martin's advice from Saturday Night Live: "don't buy stuff you cannot afford."[2]
Are we really that surprised that many consumers are reluctant to borrow and/or spend like before the crisis?
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Edits: modified first paragraph to convey what I actually meant to say, in response to ctl's comment. The original paragraph was poorly written. (Thanks for pointing out the inconsistency, ctl!)
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[1] http://www.npr.org/blogs/money/2009/02/household_debt_vs_gdp...
[2] https://screen.yahoo.com/dont-buy-stuff-000000884.html
When consumers spend less, businesses in the aggregate sell less of everything, because every dollar spent by a consumer is a dollar earned by someone else -- usually a business.
Before the financial crisis, consumers borrowed aggressively to finance consumption, like drunken sailors... but unlike the financial sector, they never got a bailout. They were forced by the circumstances to follow Steve Martin's advice from Saturday Night Live: "don't buy stuff you cannot afford."[2]
Are we really that surprised that many consumers are reluctant to borrow and/or spend like before the crisis?
--
Edits: modified first paragraph to convey what I actually meant to say, in response to ctl's comment. The original paragraph was poorly written. (Thanks for pointing out the inconsistency, ctl!)
--
[1] http://www.npr.org/blogs/money/2009/02/household_debt_vs_gdp...
[2] https://screen.yahoo.com/dont-buy-stuff-000000884.html