Consumer Spending and Arizona Bankruptcy

Does Higher Consumer Spending Amount to Increased Bankruptcies?

A June report from the Arizona Department of Revenue, which keeps track of consumer spending that the government can tax, put the total expenditures on taxable items in May of 2011 at $4.01 billion.   This is a return to pre-recession levels, and for many businesses is a good sign that the economy is recovering.

For at least a year and a half between 2008 and 2010, the amount of outstanding consumer debt decreased for the first time in many years, along with the amount of consumer spending.  This demonstrated a desire by many Americans to take on less debt.

The question now becomes:  with more Americans spending again, will there be more Americans in greater debt again?  And will this lead to more bankruptcies?  Bankruptcy statistic experts often suggest there is a delay in the correlation between consumer spending and bankruptcy filings.  This may be a result of the time it takes for consumer spending to amount to unmanageable debt, a precursor for bankruptcy.

Between 2004 and 2007, when consumer spending was at an all-time high, so were the bankruptcy filings, despite what appeared to be a strong economy.   This new evidence of rising spending may suggest a strengthening economy, but also mean a potential increase in bankruptcy filings in a year or so.