Americans having fewer babies crimping consumer spending

20:18, 22 August 2012

NEW YORK. August 22. KAZINFORM Debra Mollen, 41, a psychology professor in Denton, Texas, said she and her husband don't plan to have children as they strive to pay down their mortgage and save for retirement.

American Consumers With Fewer Babies Limit Spending: Economy

"Children are really expensive," Mollen said, and the 2008 financial crisis shows the importance of building a nest egg. "Retirement is not an option for a lot of folks."

Mollen isn't alone, as Americans have had fewer babies each year since the 2008 financial meltdown, with births falling to a 12-year low in 2011, according to the National Center for Health Statistics. The low birth rate and reduced immigration resulted in the smallest gain in population since World War II, which may hurt spending on everything from Huggies diapers to pregnancy kits, child care and education, Bloomberg reports.

"Consumption bumps up when families have children," said Dean Maki , chief U.S. economist at Barclays Plc in New York , who worked at the Federal Reserve from 1995 to 2000, and researched household finances. "The fact we are seeing fewer births is something of a drag on consumer spending . To the extent this turns out to be a persistent trend, it is something to be worried about."

The population increased by 0.92 percent, or 2.8 million people, to 311.6 million from the end of the decennial population count on April 1, 2010, to July 1, 2011, the slowest rate over a similar period since the mid-1940s, the Census Bureau said.

'Risk Aversion'

The number of births fell to 3.96 million in 2011, and it may fall again this year to 3.94 million, forecaster Demographic Intelligence predicted in July. "A culture of risk aversion among young adults" is behind the drop, the Charlottesville, Virginia-based firm said.

"Population is a very strong motivation for consumer spending," said Chris Christopher , director of U.S. and global consumer economics research at IHS Global Insight in Lexington, Massachusetts. "Weak population growth due to fewer children will play itself out in years to come."

In developments today, stocks fell as a slump in technology shares tempered optimism euro-area leaders will make progress in resolving the region's debt crisis at meetings this week. The Standard & Poor's 500 Index declined 0.4 percent to 1,413.17 at the close in New York.

In Europe, Britain unexpectedly posted a budget deficit in July as corporation-tax receipts plunged, partly due to the closure of a gas field in the North Sea .

Australia's Confidence

Elsewhere, minutes of the Reserve Bank of Australia's last meeting showed the central bank was confident domestic growth would weather a "fragile" global economy when it decided this month to maintain the highest borrowing costs among major developed nations.

As most U.S. parents know, having a child is costly. A middle-income family having a baby in 2011 will spend about $234,900 over 17 years for things like food, shelter, transportation and child care, the U.S. Department of Agriculture said in June.

Household purchases rose at a 1.5 percent rate from April through June, down from a 2.4 percent gain in the prior quarter and the weakest increase in a year, according to the Commerce Department. Purchases added 1.05 percentage points to last quarter's 1.5 percent pace of economic growth, which was down from 2 percent from January through March.

"To the degree that family formation is being suppressed, we should be concerned," said Neal Soss, chief economist at Credit Suisse in New York. "That holds back housing. It holds back all the spending associated with housing. Family formation is a very important motivator of economic growth."