Consumer spending increased 0.4%, but rose just a scant 0.1% after adjusting for inflation, in March 2008, the U.S. Commerce Department announced Thursday, as higher prices eroded income gains for Americans. Further, it was the fourth straight month of sub-par real consumer demand.
Economists surveyed by Bloomberg News had expected March 2008 consumer spending to increase 0.3%.
Meanwhile, inflation accelerated in March 2008, with consumer prices increasing 0.3%. Core prices, which exclude food and energy, also increased just 0.2%. For the past 12 months, consumer prices have increased 3.2%, while the core rate has increased 2.1%, or just above the U.S. Federal Reserve's inflation ceiling, commonly referred to as the Fed's 'comfort zone.'
In addition, real personal income, after adjusting for inflation, was unchanged in March 2008, and has risen just 0.9% in the past year.
Economic Analysis: A negative data point regarding consumer spending. The essentially flat, 0.1% increase in real consumer spending - - the fourth straight month containing a sub-par performance - - is indicative of both a slowdown in consumer demand and the larger bite of inflation, which erodes purchasing power. The March 2008 consumer spending data suggests continued economic sluggishness is ahead for at least the next three months. One modest bright point: core inflation, running at 2.1%, remains only slightly above what the U.S. Federal Reserve considers to be excessive. If core inflation doesn't increase, moving forward, that should provide additional leeway for the Fed to further lower short-term interests, should it choose to do so. However, if core inflation rises to 2.5%, the Fed clearly would consider that a sign of elevated inflation, necessitating a tightening of monetary policy.
Starbucks: The next McDonald's
Wal-Mart's launch of $20 slimming jeans will be a huge success
Why I spent some of my stimulus check on GE
Reader Comments (Page 1 of 1)
5-01-2008 @ 1:09PM
clem591 said...
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802)
3rd president of US (1743 - 1826)