Consumer spending may be down, but its share of U.S. economic activity has increased. So, we're now more dependent than before on the average Joe's open wallet to guide us out of the recession. A year ago, consumer spending accounted for 70% of the U.S. economy. Since then, it has edged up to 71%. The long-term average is approximately 65%.

The increase in consumer spending's share of the economy indicates that other sectors fell harder. Business and construction spending on new equipment have constricted at a record rate since 2008. This isn't unusual, though, as consumer spending tends to take a larger piece of the economic pie during downturns.

There is an article in The Wall Street Journal caught my eye this lovely Tuesday morning, as Sara Murray took a look at how families cut back on spending in 2008. According to the article, consumer prices increased nearly 4% when compared to 2007; but pre-tax income increased less than 1% - or $472 for an average family. Yes, the average American family made $472 more dollars in 2008 than it did in 2007. Breaking it down even further, the overall spending per consumer unit (which includes families, single people, or cohabitants) increased 1.7%, or $848, in 2008. This was the smallest spending increase since 2003. The biggest drop was in apparel spending (4.3%) while families spent 8.1% more on eating at home (which computes out to $279 per family).

Several major pieces of economic news were released this morning, and all were good. Personal Spending rose more than expected, the fastest growth in two years. The Chicago PMI report rose more than expected as well. The Michigan Consumer Sentiment report seemed to hold its own. In addition, the core inflation number came in within the Fed's target range.

This is a major contrast to the numbers earlier in the week. Durable Goods and Consumer Confidence reports were terrible, and both Existing and New Home Sales indicated that there appears to be no end in sight for the housing slump. The only good number was Second-Quarter GDP. However, this was prior to the turmoil created in the markets by the credit crisis.

Then, why did the stock market rally on the bad news and is going down today on these positive economic reports? It's the liquidity. The stock market is driven by money and credit. As there is greater availability and lower cost, the market performs better. Who is the ultimate gatekeeper for this? You guessed it: the Federal Reserve.