Private consumption plays essential role in the public economy, especially in industrialized countries which have relatively large middle class of which lifestyle and decisions, for example in housing and real-estate markets work as a rudder for the public economy as a whole. It´s basically a self-reinforcing phenomenon where wealth is distributed from to public to the national economy. In the the time of recession, the stream tends to turn backwards.
Rate of major purcases have always been an indicator of the situation in public economy. Downhill in economy will mean less large investments for example in motor vehicles and especially in mortgages. Banking sector will be more cautious in loaning money and that will cause growth in interest rates. When money is more expensive, people will postpone or at least get more selective concerning large purchases. Consciousness of opportunity costs increases within the public and make an effect on overall consumption. I mean, why would the shoemaker buy a shiny new car for the family when he could buy (or maybe make, in this case) new shoes for his kids when they have none and when he has less and less money to spend?
Recession or economic stagnation makes people to be more aware of their spending. On that economic situation, salaries tend to have only moderate to low, even zero overall growth. Taxation gets higher when there is not enough tax revenue to uphold current public spending.The customer becomes more sensitive to the price of goods and services.
On the opposite situation, when the economy is in the tracks of growth, people have more money to spend. It´s mainly because of the drop in unemployment, more jobs are created making salaries go up because of the scarcity of workpower. Taxation gets lower which also has a positive effect in spending. People buy more luxury items and spend more money in services which are not essential in necessity.
Role of the media and its influence to the general public and to its behavior in market should not be underestimated or overlooked. Media and public economics should be seen as intertwined influencing factors in customer behavior. We humans tend to act and especially consume alike to our peers, mainly because that quintessential attribute in Homo Sapiens can, will and is used in great amounts in marketing and advertising. This same code in the species of the “Wise Man” works its way in the times of economic crisis and the mainstream /sensationalist media is a one, significant factor to blame, actually. We live in a time when minor monetary decisions of the European Central Bank seem to have (according to the bold headlines of evening papers) crucial impact on Average Joe´s life. When he hears these types of news, months or even years on end, he is inclined to hop in the panic bandwagon. This is when herds turns to hordes and ultimately will lead to bubbles bursting.