Thursday, November 01, 2007

Consumer Spending Lowest in Three Months

Can you smell the recession? Gee what a surprise!!! The American consumer is tapped out? Could it be the $915 billion in credit card debt? Could it be the end of easy credit for homeowners? Could it be the wealth effect now that homeowners are looking at declining values? This is trickle down economics when the trickle has almost completely stopped.
American consumers, battered by a steep downturn in housing and a severe credit crunch, slowed spending growth in September to the weakest performance in three months.

The Commerce Department reported Thursday that consumer spending rose by 0.3 percent in September, slightly lower than the 0.4 percent increase that analysts had been expecting. Incomes grew by 0.4 percent, matching the August gain, and in line with analysts' forecasts.

Economists are worried that consumers, the main support for the economy, may cut back on their visits to the malls in coming months as they struggle with the housing slowdown, tighter credit and now record-high oil prices.

The Federal Reserve on Wednesday cut a key interest rate for the second time in six weeks in an effort to make sure the economy does not tumble into a recession.

The news about inflation from the consumer spending report was good. Prices paid by consumers on the Fed's preferred inflation gauge rose a moderate 0.2 percent in September, excluding food and energy.

This measure is up 1.8 percent over the past 12 months, inside the Fed's comfort zone of increases in core inflation of between 1 percent and 2 percent.
How are we supposed to take the inflation numbers seriously? Food and energy are excluded and with oil now topping $95.00 per barrel the average consumer will see real inflation no matter what this government report shows. In the real world food and energy are two very large components of daily life.

The average consumer is suffering and its time that government reports reflect that!!

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