In Search of Big Spenders; American consumers spend nearly $9 trillion a year, or 20 percent more than Europeans. But the binge is now coming to an end.

Byline: Stephen Roach (Roach is the chief economist at Morgan Stanley.)

The world has never seen such big spenders. In the United States, private consumption accounts for 70 percent of the economy, far more than in Japan (57 percent), Europe (54 percent) or China (38 percent). U.S. consumers now spend nearly $9 trillion a year, 20 percent more than Europeans, three times more than the Japanese and nine

times more than the Chinese. But the American binge is coming to an end.

As the U.S. housing bubble bursts, the American consumer is likely to stumble. Without the "wealth effect" imparted by rising home prices, households will be exposed more directly to the longstand-ing pressures of stagnant real wages, record debt loads and negative saving rates. Cutbacks in discretionary spending are likely--hitting big-ticket items such as cars, furniture, appliances, travel and entertainment.

This weakening of U.S. consumption is likely to have important global consequences. That's because growth in the rest of the world is overly dependent on exports--especially those to America. For example, from 2003 to 2005, export growth averaged 7 percent a year in Europe, Japan and the newly industrialized economies of Asia, such as South Korea, Taiwan, Singapore and Hong Kong. That was nearly six times the anemic 1.2 percent average growth rate of private consumption in these same economies.

In China, exports have now risen to more than 35 percent of GDP, with about 40 percent of them going to the United States (when Taiwan and Hong Kong are included). And China's supply chain is fed by component manufacturers elsewhere in Asia, including Japan, as well as bymaterials producers in Brazil, Australia, Canada and even Africa. Consequently, any sneeze by the American consumer could quickly give the rest of the world--developed and developing countries alike--a nasty cold.

Ill prepared for this possibility, the global economy needs a new consumer. That won't be easy to find. Employment growth and real-wage trends--the forces that sustain consumer purchasing power--remain weak in most industrial economies. Globalization is pushing job creation offshore and squeezing pay rates. Productivity and competitive pressures are compounding the problem.