US Consumer Spending Up
September 28, 2007
US consumer spending has shown a marked improvement over the course of August over the course of August in the face of credit crunch conditions and a deteriorating housing market, according to official figures released today.
In figures released by the US Commerce Department, consumer spending over the course of August was said to have risen by 0.6%, up from an increase of 0.4% in July and the most significant rise in around four months, despite economic results that would imply the contrary.
Simultaneously, consumer prices rose by just 0.1%, a stable increase in line with that of the last run of six months, meaning the US economic rate of inflation is on track not to cause any problems for the Federal Reserve at this time.
The boost in sales is thought to be partially down to the slash in interest rates initiated by the Federal Reserve, which also saw banks breathe a sigh of relief, and the price of variable mortgages decrease to the benefit of the public at large.
And with the likelihood of further rate cuts round the corner, consumer attitudes appear buoyant in the face of wider economic problems stemming from the housing market situation, which has also brought widespread instability to the global marketplace in recent months.
The collapse of the US sub-prime sector had driven many lenders to the brink of financial ruin, virtually forcing the Federal Reserve to cut rates in that manner. Analysts are now predicting that further rate cuts are around the corner, which they say will inevitably help increase consumer spending and fuel business growth as a positive side effect of helping ease the liquidity situation.
However, the Federal Reserve will be keen to closely monitor growth within the US economy with a view to preventing any inflationary threat which could pose problems if rates were to continue to be cut further.