Consumer spending rose in the first quarter of 2009, causing some to conclude that consumption hit bottom and good times are ahead.  But The Economist notes that the bottom does not mean "vigorous rebound...Consumption may be growing again, but there is every chance it will remain depressed in coming years because of weak income growth, depleted wealth and tightened credit."  For the last three decades, spending has outpaced personal savings and GDP.  But that was not necessarily a crisis situation, as long as income continued to grow.  But income stopped growing in 2000, as debts continues to rise.  So now the growth that consumer spending should prompt will be tempered by the debt consumers have built up.  

A sudden rush to return debt ratios to where they were in 2000 would require ridding households of some $3 trillion in mortgage debt—an almost impossible task. More probably, mortgage debt will grow more slowly than income through a combination of lenders writing off impaired loans, homeowners paying down existing mortgages and new homeowners taking out smaller mortgages than in the past. Bruce Kasman of JPMorgan Chase estimates that the most dramatic phase of increased saving has already occurred, and spending will grow only a bit less than income.

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