Where’s the Supposed Pent-Up Demand?

The preferred explanation of progressives for the slow recovery is weak demand, an argument that seems to fly in the face of data showing that sales, consumer spending and profits are all rising steadily. Julia Coronado of BNP Paribas (HT: G.I. at the The Economist’s Free exchange blog) tackles the issue, showing that consumer spending, after a recession-era drop, has returned to its pre-recession levels of growth. As Coronado puts it, there are “no indications that a surge in spending to make up for lost time is imminent.” Indeed, there’s no reason we should expect one; that consumption is growing at its historic levels means the adjustment has already occurred. Coronado’s graph is displayed below.