What is generally a key indicator of economic health in a country?

Consumer spending habits are generally a key indicator of economic health in a country because they reflect the overall confidence and financial well-being of households. When consumers feel secure in their jobs and have a positive outlook on their personal finances, they tend to increase their spending. This, in turn, stimulates economic activity, driving demand for goods and services, which can lead to business growth and investment. High levels of consumer spending are often associated with economic expansion, while declines may indicate economic distress.

In contrast, while exchange rate stability, government spending levels, and business confidence indices are all significant economic factors, they do not directly capture the everyday financial behaviors of a broader population as consumer spending does. Exchange rates can be influenced by various external factors beyond domestic economic health, government spending may vary based on political priorities rather than direct consumer action, and business confidence indices, while valuable, often reflect the sentiment of a more limited group compared to the vast consumer base. Hence, consumer spending habits serve as a more tangible and immediate measure of economic vitality.