... the world catches a cold, or so the old saying goes. America is the world's largest consumer driven economy, and the probability of the US economy hitting some bumps in the road is increasing. The US government spends like drunken sailors, interest rates have been incrementally increasing, discretionary income is being squeezed by rising property prices, and the sentiment of the American consumer is losing its perkiness.

Chris Berg and Catallaxy both covered some of the pressures on the disposable income of the American household. These include mortgages, second cars, health insurance and taxation. Spending on household items has fallen in the last thirty years.

Consumers also face quickly rising gas prices, not only in the US, but around the world . This is not a problem of not enough oil being around, but more a restriction of how soon it can be brought to the market. The high cost of petrol does impact household spending. As Barry Ritholz commented ;

Over the past decade, when gasoline prices have been falling, year-on-year same-store sales gains at Wal-Mart have tended to outpace the growth in overall retail sales and vice versa. ...

While it is not necessarily causal, it lends some credence to the idea that the working-class customers of the nation's largest retailer adjust their spending in response to what they must pay at the pump.

Ritholz argues that since the US economy is 70% consumer driven, that there are five general markers which can give an insight into the future direction of the stock market.

1) Income: Do they have a ready supply of spending dough? Is it going up, so they can maintain present spending levels?
2) Debt: Have they spent too much? Can they service the debt they have already run up?
3) Deflation/Inflation: Is inflation eating into their spending power? Is deflation encouraging them to hold off purchases until items get cheaper?
4) Psychology: Are they in a spending mood? Is there anything weighing on that mood?
5) Spending: Too obvious to even discuss.

All five have been decaying over the last two years . Income has slid and has not kept up with inflation. Prices for commodities outside of health and education have doubled in the last four years. Sentiment is weakening - Iraq, Katrina, etc. Delinquency rates on credit cards have increased. Spending dropped 0.5% this month, the largest drop in quite a while.

Government's are weakest when the economy is weak, even though a poor performing economy is not directly a government's fault. When America sneezes, Australia catches a cold. If the US consumer tightens their belt, then it may have political ramifications in Australia.