Consumer purchases in July rose .4 percent; this was a larger growth than was initially forecasted by many analysts. This serves as a positive indicator for the future of our economy which is currently in shambles. Obviously, more purchases means that their is more money being injected into the market which hopefully foreshadows that the economy should avoid slipping back into a recession.
However, a counteractive force to the positive news of the consumer spending growth was the finding that disposable income has actually gone down this past month. Theoretically, this means that people will likely be spending less this coming month. Allow me to clarify that although actual income increased due many workers working more hours, disposable income dipped due to the fact that inflation has increased.
I'd love to entertain any ideas as to what people forecast will happen in the coming month. Will people continue to increase their spending habits or will the economy once again slow due to the drop in disposable income?
The unemployment rate is expected to increase this month according to a Labor Department report on September 3rd. This coupled with the continuation of bad economic news will discourage consumers from spending their already smaller disposable income. Spending growth is predicted to be very slow during the second half of 2010. There are many factors, other than disposable income, that will likely lead to the slow down of the economy.
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