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.

Continue reading Recovery now more dependent on consumers than ever

Recovery now more dependent on consumers than ever originally appeared on BloggingStocks on Mon, 12 Oct 2009 16:45:00 EST. Please see our terms for use of feeds.

Continue reading Families tried to reign in the spending last year

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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.

Consumers now spent up, not pent up originally appeared on BloggingStocks on Sun, 02 Mar 2008 16:10:00 EST. Please see our terms for use of feeds.

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.

Continue reading The economy and the Fed: When good news is bad!

The economy and the Fed: When good news is bad! originally appeared on BloggingStocks on Fri, 28 Sep 2007 12:25:00 EST. Please see our terms for use of feeds.