Despite the Turmoil, Americans Are Still Spending
Well, we Americans are nothing if not persistent. According to a recent report released by the government, incomes are slowing, inflation is increasing and yet, Americans are still spending. The Fed would know too, as consumer spending accounts for more than two-thirds of the country’s economic activity and is closely monitored as a gauge of the economy’s health as a whole.
This is especially interesting considering that reports also conclude that consumer confidence has dipped to all time lows. Uncertainty about inflation is on everybody’s mind, or so it would seem. And yet it is our resilience when it comes to blowing our dough that has prevented the economic state from plummeting into a deeper state of recession, or worse yet, into a full blown depression.
Here’s the disturbing news - if incomes aren’t increasing, prices are and spending remains the same - something has got to give right? Well it turns out it’s our collective savings account that’s taking the hit. Personal savings increased by a mere 0.2% in March (down from 0.4% the month before). Let’s put this into perspective: For every $1,000 that Americans bring in (after taxes), they are saving a whopping $2. Ouch!
According to the New York-based Conference Board, its Consumer Confidence Index dropped to 62.3, the lowest level since March 2003 (down from 65.9 in March). However, considering all of the negative economic news of late (my blog included) devoted to rising food and oil prices and record-breaking numbers of foreclosure, the fact that the nation’s gross domestic product hasn’t shrunk in the first quarter is a victory we’ll cling to for dear life.
Officials expect consumer spending to weaken when April’s numbers come in, but expect the following three months to show an upturn in consumer spending thanks in no small part to the government’s stimulus plan.
Considering that we’ve proven we don’t care much for saving our money these days, it looks like the government’s insistence that we pump the stimulus money back into the economy just may happen after all.
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