As much as troubles across the pond cast a dark shadow over the U.S. economy, underlying changes in consumer spending are likely to persist at home as the uncertain economic climate pushes Americans to spend less, save more, and pay down debt. While that's good in the long term, it means consumers will continue to hold back on spending—bad news for retailers as the holiday season approaches and an unfavorable overture for the economy going into the fourth quarter.
Consumers and businesses are also still reeling from the catastrophic events of this summer when Congress was unable to forge a deal with the White House on controlling the nation's debt, which resulted in the first-ever downgrade of U.S. debt.
"A lot of the policy uncertainty surrounding exactly what Washington is going to do to deal with the deficit is making businesses and consumers cautious," Behravesh says. "You've got some combination of deleveraging and a crisis of confidence to deal with."
While economic indicators are looking up for the time being, economists remain cautiously optimistic businesses and consumers will continue the upward trend in spending. Even still, faced with myriad other political and economic challenges, a recovery in the United States might simply look like the lack of a recession.