Consumers now spent up, not pent up

Posted Mar 2nd 2008 4:10PM by Zack Miller
Filed under: Personal Finance, Recession

In another nod to a slowing economy, consumer spending slowed in January, while income growth sputtered as well. The Wall Street Journal reported recently (subscription required) that the Commerce Department said "personal spending rose 0.4%, but was unchanged after adjusting for inflation. Such spending was also flat in December and October."

It seems to be a perfect storm of sorts. Consumers are cutting spending as they face dropping home prices, high energy prices, tightening credit markets, and a more limited job market.

As consumers spend less, they may be forced to dip into the proverbial cookie jar and start spending rainy-day savings. The same article said, "Rising prices may be prompting consumers to dip into their savings. The personal saving rate fell 0.1% in January, repeating December's performance."

While economists and politicians debate whether the U.S. has dipped into a recession, consumers are already feeling the pinch.

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

Tags: consumer spending, economy, inthenews, personal spending, recession, savings

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Reader Comments (Page 1 of 1)

3-03-2008 @ 6:23AM

Georgie said...

Well the real trouble here is the Federal Reserve is for some untold reason throwing in the towel for now on inflation and going for rate cuts to stimulate more people to do what? Borrow more money? Is this really a fix for the state of our economy? What about the deficit? How many trillions in debt is the country now?
IMHO it is irresponsible of the "Fed" to be trying to prolong the expansion end of the business cycle when it is quite clear to even novices like myself that the natural flow of the cycle needs to run it's course; ie CONTRACTION. Stop screwing around Bernanke. IMO You are doing the wrong thing and you know it. The economy NEEDS a little contraction. Let the speculators take the hits they need to take. RAISE interest rates to try and get a grip on the coming inflation/stagflation whatever the heck it is we are heading into. The worst part of this whole equation is the dollar losing it's value on almost a daily basis. The Euro at $1.51? Come on what a farce! The United States is the juggernaut of the world economy. We can weather a little pain with a slow-down. And darn it, stop rewarding the irresponsible folk who are in debt way over their heads by encouraging them to take on MORE debt....how about giving RESPONSIBLE folk a little boost in their savings accounts so they can at least keep up with inflation and their savings don't EVAPORATE. Kills me to see the FEDERAL RESERVE (which we know is NEITHER) a darn private banking interest who answers to the banks that control it purposly doing the WRONG thing at this critical point in our history. Is the United States headed for a "monopoly money" economy? Keep it up Ben B. and company, you are doing a great job screwing the wealth, wringing the wealth out of America! Ron Paul for President. He'd get rid of these bums and give the power of our currency back to the people where it belongs.