Consumers Are Worried About The Economy
Many different factors are beginning to take their toll on the American consumer as they try to cope with the current woes of the economy. Consumer confidence continues to fall as more and more people grow worried about a recession.
Many retailers are having to downgrade their earnings forecasts for this quarter as consumer spending shows increasing signs of weakening. High end retailers are faring the worst, as consumers are becoming much more cost conscious at the checkout counter.
The prolonged housing slump is expected to continue for the foreseeable future. The sharp decline in housing prices has taken a big chunk out of the wealth of what for many is their single biggest asset. Many who have purchased homes in the last two years now have mortgages that are worth more than the values of those homes.
The subsequent collapse of the sub prime market and the accompanying credit crunch has also had a large effect on consumer spending. With the troubles of the banking system, individuals and businesses are finding it harder and harder to borrow money. Credit card issuers are also seeing an increase in late payments and a slowing in spending.
Higher living expenses are also to blame. The sharp rise in energy and food prices are taking a larger percentage out of disposable income for many middle and lower class Americans. The weak dollar has also meant a sharp rise in the cost of imports. While all this is taking place, there has been little to no wage inflation reported as of yet.
The biggest factor to the slowing of spending may be the economy itself. As economic growth continues to slow, more and more Americans are becoming worried about the future of their jobs. January saw the economy lose jobs for the first time in years and many are fearful that trend may continue.
