Carlos Lam

PIMCO (Economic Pessimist) vs. Barclays (Economic Optimist)

"Consumers have made the appropriate adjustments to their savings rates and are not likely to cut consumption further."

The household debt to GDP ratio is still just under 100%; for most of the 20th century it was at about 50%. To be sure, consumers MUST cut consumption further; they don't have the money to keep consuming at the current rate.

"Additionally, low interest rates and low housing prices mitigate against further increases in the savings rate."

In one sense, you're correct. The Fed has left interest rates too low for too long. However, the Baby Boomers -- a cohort of about 70 million Americans -- are going to necessarily cut back on spending as they age (there is a negative co-relation between the golden years and spending). Moreover, if the theory that the Boomers will boost savings in preparation for retirement holds true, then this will add further constraints to consumer spending.