Consumer spending almost at a standstill
March 3, 2008
On the 29th of February the consumer spending in the country came to an almost standstill. The consumer spending throughout the country has been threatening to freeze up for a long time. The reason behind the declining consumer spending is said to be the completely battered consumer sentiment prevailing in the US. The consumer sentiment has been reducing frequently as a result of the sky high energy prices and the fallout in the housing sector.
The economists in the nation said that the reports about the consumer spending that came in on the 29th were clear indications that the county’s economy was moving from bad to worse. They are of the opinion that the fallout in the consumer spending is because of the looming prospects of an economic recession.
The Commerce Department of the nation however, on the 29th, announced that the spending had actually gone up by 0.4 percent in the month of January. This according to them was much better than what the analysts had been predicting. However the fact is that the gain in consumer spending that the Commerce Department announced was as a result of the gush in inflation that had happened during the course of the month. If the impact of the rising prices were neglected the consumer spending for the month of January did not really show any gain. This was the second month in a row when the amount of money spent by the consumers did not increase.
Ever since the last two months of the year 2001, when the country was down with the previous recession, this is the first time that the consumer spending has touched this low barring the 2 months in the year 2005 when the disruptions due to the Hurricane Katrina had weakened the consumer spending by a considerable amount. This is rather an alarming fact because the last time the consumer sentiment was in a negative state the country was in a recession.
A survey to measure the consumer sentiment that was conducted recently found out that consumer confidence has dived to an even lower limit in the month of February. The reading about the consumer sentiment in the nation which is displayed at Reuters/University of Michigan showed that the consumer sentiment has taken a fall to reach 70.8 in the month of February. In the last 16 years the consumer sentiment has never taken this big a fall. A survey which was conducted by the Conference Board suggested that the consumer sentiment reading that was recorded for the month of February was even lower than what it was during the war of Iraq in 2003. The consumer sentiment that was recorded for the month of January was 78.4 and the amount by which it fell in just one month is quite disturbing.
The common opinion of the analysts around the nation is that the slowing down of the spending and decline in consumer confidence is reflecting the bad time through which the economy had gone through in the last few months.