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Some consumer economies

  • In 2017, the United States household final consumption expenditure (HFCE) is $13t, which is 68% of its GDP.
  • In 2017, the United Kingdom has a HFCE of 1.7t, which is 66% of its economy.
  • In 2017, Hong Kong has a HFCE of 228b which is 68% of its economy.

Source: Wikipedia

What is consumer economy?

A consumer economy is an economy driven by consumer spending unlike production exports like industrial economies.

While I fully understand how consumer economy works in microeconomics (basically everything is the same and perfectly normal) and noted that US is an exception to the norms of international economic norms (since it's the owner of USD), I would like to be enlightened on how a consumer economy is possibly sustainable in terms of balance of trade, …aside from waiting for miraculous FDI injection

  1. How can I continuously consume without running out of money&resources? (assuming this nation is not a Juche/Soviet)
  2. Does this not eventually cause a devaluation of your national currency if you keeps on importing more than you export?
  3. Is it OK for me to conclude that consumer spending is bad, we should save as much as possible like Singapore, China and Japan and focus on exports to make as much incoming money as possible?
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  1. It's sustainable, in the sense of "have the ability to continue consuming", so long as countries will loan us the money. Why they loan us the money is there trust that we will pay it back (they trust us) and that they save more than they consume (they have money to lend).

Now if they decide to stop buying our bonds, then surely it's not sustainable. Here is a terrific Michael Lewis article explaining what happened when Japan stopped lending to U.S. companies in the late 1980s:

https://www.vanityfair.com/news/2011/03/michael-lewis-japan-201103

  1. Consumption now and Saving for later are two sides of a coin. Which you value more is dependent on your opinion. Do you want a sense of security? (save more), do you want to live it up while you're young? (save less), etc.
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The short answer is that a high level of consumption compared to GDP is sustainable, until it is not, and foreign investment is one reason.

For a longer answer please see the answer to a very similar question at this link.

Sustainability of the U.K. economy.

You asked about currency depreciation. Almost all currencies depreciate almost all of the time because a small positive inflation rate is good for all economies. A currency is supported by foreign investment but it will depreciate regardless in the case of almost all currencies almost all of the time. Whether a currency depreciates relative to another is a different question. Foreign investment means that you cannot look at the balance of trade alone.

You asked if an economy should focus on exports. There is no single coordinator to focus the economy. Trade and investment are the result of the balance of forces domestic and foreign. That is explained at the link. Sustainability of U.K. economy. Single coordinators can make bigger mistakes than uncoordinated individuals.

Foreign investment might be more volatile than exporting goods and services to foreigners but for some countries this concern is not so significant that it has become a major issue. There are counter examples such as the 1997 Asian financial crisis. Exporting goods and services is not inherently stable business either, because there can be a surge in protectionism or another politically or strategically motivated event or a Brexit-like event.

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GDP is, by definition, basically only consumption and government spending. That's why you see consumption reported as such a high % of the overall number. Gross Output (GO) is a more comprehensive measure of economic activity, and on that measure household consumption is closer to 35% of the economy. A "consumer economy" isn't one in which most economic activity is in the form of consumption of imported goods — there is plenty of production going on in such countries, as well. More production than consumption, in fact (since many of the goods produced are used by other businesses, and often not counted in GDP figures.)

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