Robust consumer spending shields US economy from global turmoil

Call it the US$11 trillion advantage: Consumer spending is likely to steer the United States economy safely through the shoals of deteriorating global growth and turbulent financial markets.

The combination of more jobs, falling petrol prices and low borrowing costs will help lift household purchases. Such tailwinds probably matter more than Europe's struggles or the slackening in emerging markets that caused the Dow Jones Industrial Average last week to erase its gains for the year.

"We've got a lot of things working in favour of the consumer right now," said Nariman Behravesh, chief economist at IHS. "To have that kind of strength is the biggest asset for the US. It's a pretty rock solid footing."

Household purchases make up almost 70 per cent of the US$16.8 trillion US economy and have climbed an average 2 per cent in the recovery that's now in its sixth year. Spending growth is forecast to accelerate to 2.7 per cent next year after 2.3 per cent in 2014, according to a survey of economists.

"We've got the proverbial 800-pound gorilla - the consumer," said Joseph LaVorgna, chief US economist at Deutsche Bank Securities in New York. "Households are more fixated on the good news here, and a big part of that is the labour market. The US is going to be pretty immune to the rest of the world."

Economic weakness in Europe, slowing growth in China and tensions in the Middle East sparked a US$3.5 trillion loss in value for global equities through last week since a record in September. Brent crude oil sank to an almost four-year low and the dollar has climbed almost 5 per cent since June.

The International Monetary Fund cut its forecast for international growth in 2015 and said the euro area faces the risk of a recession. The Washington-based lender trimmed projections for emerging markets including Brazil and Russia, while raising them for the US.