Consumer Spending Up, but Can Fast Growth Last?

Consumers spending last quarter increased at an annual rate of 2.6 percent, and this was the fastest consumption growth rate since the fourth quarter of 2006. This growth largely drove economic output to grow at an annual rate of 2 percent.
But there are reasons to worry that such fast-paced growth may not be sustainable.
First, consumers still have debt, and that debt is likely to decrease additional spending.
Additionally, job growth is slow. People cannot spend much more because their income isn't growing much.
Finally, consumers are more attracted to foreign-made goods. That means net exports were a drag on GDP.

poll shows Americans don't know economy esxpanded with tax cuts

Many Americans are unaware that the Obama administration has actually cut taxes instead of raised them, which is the popular belief. Since taking office in 2009, President Obama has made over 200 billion tax cuts to families, but has focused mainly on the middle class. This poll shows that the ratio is 2:1 on people who think taxes have gone up. Also, many people believe that the economy is shrinking. Many people, me included, think this is unacceptable, and the government needs to do a better job communicating facts to the public. The problem is the United States is going through tough economic times, and if the peoples belief is that Obama is taxing more, people will save more money and spend less. But, to get out of this economic situation people need to be spending more money, which is why there needs to be better communication.

College Costs Up Again

Here's some disheartening news for all of us undergraduates: college costs are on the rise again. The College Board just released a report showing that the prices of tuition and fees are increasing this year. At four-year private colleges in the US, the average tuition rose to $27,293, a 4.5 percent increase over last year. Public four-year universities saw an increase in average tuition of around 12%. These schools in particular face shrinking budgets because states currently have to cut back spending, so the difference is being made up in tuition. The fact that costs are rising really comes as no surprise - they have been for decades. However, while many of us were counting our blessings that we weren't out facing the job market just yet, it seems that college is not offering as much protection from the economic downturn as we might hope. 

U.S. Economy Grew At 2% Rate In Q3, Consumers Step Up

The US economy grew 2% in the 3rd quarter, which was up from 1.7% in the 2nd. However, because the unemployment rate is still 9.6%, the Fed is feeling pressure to help boost the economy. Consumer spending rose the fastest this past quarter than it has in the past 4 years. It grew at a rate of 2.6% which added 1.8% to the US GDP. It is expected that the Fed will attempt to jump-start the economy, create jobs and boost inflation, which, as reported by the Fed, is running low.

Why the Fed's bold move won't work

The Fed is still trying to jump start the economy. The Fed is expected to purchase hundreds of billions in new assets. This big purchase will supposedly help the economy recover faster. The theory behind this action is the quantitative easing theory which will drop interest further and encourage businesses and consumers to spend more. This will be the second time that the Fed pumps money into the economy. There are of course people that are against this policy. Many say that quantitative easing will not help the economy. Kansas City Fed President Thomas Hoenig referred to it as a "bargain with the devil."

Immigrants Gaining Jobs, Native-born Americans Aren't

According to a Pew Hispanic Center report, legal and illegal immigrants had a net gain of 656,000 jobs while native-born Americans lost 1.2 million since the recession’s end in June 2009. As a result, the unemployment rate for immigrant workers fell during this period from 9.3% to 8.7% while for native-born workers it rose from 9.2% to 9.7%. From mid-2009 to mid-2010, median weekly earnings of foreign-born workers fell 4.5% compared to a decline of less than 1% for native-born workers. The article suggests that immigrants appear to be more avid in pursuit of jobs where native-born Americans have been dropping out of the labor force while immigrants have been entering the labor force more than they have been leaving it. It might be that immigrants were more accepting of lower wages and reduced hours because many, especially those who are unauthorized immigrants, are not eligible for unemployment benefits.

Poll: Americans Don't Know Economy Expanded With Tax Cuts

In a national poll conducted by Bloomberg, most Americans do not know the recent marginal economic expansion over the last four quarters is due to middle class tax cuts by President Obama. In fact, according to the poll many Americans who's taxes were lowered under Obama's plan, think that they are actually experiencing a tax increase.

Economic growth weak in third quarter

The numbers are in and they're just mediocre. GDP grew at an annual rate of 2% for the 3rd Quarter. Many analysts and economists have stated that these numbers indicate that a double-dip recession is unlikely. Yet, expansion, which usually is indicated by growth rates of about 3.6% is unlikely as well. Sadly, growth will be drastically improving anytime soon according to forecasters. However, consumer spending was up 2.6%, which is a bright spot. Or it would be except that the numbers indicate that people dipped into their savings instead of gaining more disposable income. Oh well, here's to a slow recovery.

Japan's Exchange Rate Problems

Nintendo, a major video game maker in Japan, has recorded a half year loss.

"Nintendo has reported a half-year loss after being hit by falling sales and the high value of the yen, which lowers its overseas earnings.

The Japanese computer games firm posted a net loss of 2bn yen ($24.7m; £15.6m) for the six months to 30 September.

This compares with a net profit of 69.5bn yen for the same period in 2009.

Nintendo's sales for the first half of its financial year were down 34% to 363.16bn yen, partly due to lower demand for its Wii console.

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The company did not release a net profit figure for its second quarter to 30 September, however its operating profit more than halved to 30.9bn yen."

Looks like a strong currency does have it's drawbacks.

Microsoft's Net Surges 51% on Core Products

Even without the glamour of an iPad or another novel technology hit among consumers in its product lineup, Microsoft Corp. posted a 51% profit jump as two of the most venerable products in the technology business—Windows and Office—continued to thrive.

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The software giant's results suggest the standout growth of two of its biggest rivals,Google Inc. and Apple Inc., haven't yet begun to meaningfully hit Microsoft's cash cows.

Yet the earnings still leave unanswered questions about whether Microsoft can reap financial success in fast-growing markets like mobile phones, tablet computers and Internet search.

Apple, for one, recently showed how it has capitalized on businesses that it wasn't in just a few years ago, posting a 70% quarterly earnings jump partly on robust sales of iPhones and iPads. Apple earlier this year passed Microsoft to become the most valuable technology company, with a $280 billion market capitalization to Microsoft's $227 billion.

Still, Microsoft posted solid sales growth of its own over its fiscal first quarter ended Sept. 30. Revenue was $16.2 billion, up 25% from a year earlier.

In an interview, Microsoft Chief Financial Officer Peter Klein said Microsoft is thriving from a "refresh" of technology purchases by businesses of all sizes, and that the company saw "terrific growth in enterprises and small and medium businesses."

Investors appeared to like what they see, sending Microsoft's shares up 3% in after-hours trading after closing at 4 p.m. at $26.28.

Microsoft's results come after two weeks of relatively strong results from tech companies. Apart from Apple, which was driven by consumers purchasing gadgets like the iPhone, business-oriented companies such as International Business Machines Corp. also reported strong growth.

Other tech companies' earnings suggested computer demand has cooled somewhat, while remaining at high levels. Over the quarter, Microsoft's fastest growing business was Windows, which saw sales jump 66% to $4.79 billion from $2.88 billion during the same period the prior year, when it deferred $1.47 billion in sales.

The sales reflect the positive reception for Windows 7, a new version of Microsoft's flagship operating system that has been more positively reviewed than its predecessor, Vista. The company said it has sold more than 240 million licenses to Windows 7 since the product's debut a year ago, making it the fastest-selling operating system in the company's history.

Still, Microsoft hasn't participated meaningfully in the growing tablet market, now dominated by Apple's iPad. Some industry executives believe tablets are beginning to bite into sales of low-end laptops running Windows. Microsoft executives have said they expect more tablets running Windows 7 to go on sale next year.

"That has a surprisingly big overhang for something that's a relatively small part of the PC market," said Brendan Barnicle, an analyst at Pacific Crest Securities.

Another potential threat to Microsoft's Office business—Google's online suite of free applications—doesn't seem to have hurt the company yet.

In the first full quarter for sales for its new Office 2010 software, Microsoft said sales jumped 14% to $5.13 billion from $4.52 billion from a year ago for its business division, which is dominated by Office.

Mr. Klein said Microsoft has sold 20% more units of Office 2010 since the product's launch than it did of the product's previous version during the same time period. "There's no evidence of the competitive issue at all," he said.

Overall, Microsoft said income for the quarter was $5.41 billion, or 62 cents a share, up from $3.57 billion, or 40 cents a share, from the same period a year earlier.

The coming quarters will be big tests of Chief Executive Steve Ballmer's big investments in new consumer markets. The company continues to lose money in its online services division, as its operating loss in the group widened to $560 million from $477 million in the year-ago quarter.

Microsoft recently completed the transition of search advertisers from Yahoo Inc. to Microsoft's online ad system, part of a multiyear deal between the companies in which its Bing search engine has begun powering searches on Yahoo.

Microsoft next week will also begin selling Kinect, a new device that allows users of Xbox 360 game consoles to play videogames without having to hold a controller.

Another major product for the holidays, its Windows Phone 7 operating system for mobile phones, will go on sale on devices next month.