Jump to content
House Price Crash Forum
Sign in to follow this  
interestrateripoff

U.s. Consumer Spending Jumps; Jobless Claims Up

Recommended Posts

http://www.nytimes.com/2009/10/02/business/economy/02econ.html?_r=1&ref=business

Wall Street’s bulls went running for cover on Thursday after a fusillade of new figures suggested the economy’s rebound could be leveling off, and that any recovery may come in fits and starts over the rest of the year.

A day after investors wrapped up one of their strongest quarters in years, stock markets fell the most since the first days of September.

In the final hour of trading, the Dow Jones industrial average fell 160 points or 1.6 percent, and the broader Standard & Poor’s 500-stock index was off 2.1 percent. The Nasdaq sank the most, tumbling 2.59 percent on losses in software makers and network companies, in its worst single day since mid-August.

Some the day’s economic figures, like an increase in construction spending and the number of home sales under contract, do suggest continuing growth. But a rise in first-time unemployment claims and an unexpected drop in manufacturing activity showed that some forecasters’ expectations may be too optimistic.

“We don’t think we’re going to come out of this unscathed and be back to business as usual,” said Scott Anderson, senior economist at Wells Fargo. “Consumers will continue to be suffering from the headwinds of the financial crisis. Debt levels remain too high.”

But a new report on personal spending showed that consumers would still open their wallets if offered a good enough deal.

Consumer spending, which makes up 70 percent of the economy, rose sharply in August as car buyers took advantage of taxpayer-financed rebates under the government’s “cash for clunkers” program, the Commerce Department reported.

While the 1.3 percent spike in spending was the largest in nearly eight years, economists said it was not the foundation for any long-term rebound in the consumer sector. The government’s $3 billion clunkers program has ended, and automakers are bracing for a drop in September sales from a month earlier.

With consumers still worried about losing their jobs and the value of their homes and investments, economists said the surge in spending was probably a one-hit wonder. Still, it was the fourth consecutive month of growth in spending.

“I wouldn’t expect it to continue,” said Alan Levenson, chief economist at T. Rowe Price.

In its monthly snapshot of spending and wages, the Commerce Department also reported that incomes inched up 0.2 percent in August, and that private wages and salaries increased slightly.

The personal savings rate dipped to 3 percent from as high as 5.9 percent in May as consumers spent more of their disposable income, most likely on new cars and trucks. The decline in savings suggested that consumers are still in a precarious position — faced with slowing income growth and pay freezes, many are able to spend or save their money, but not do both at the same time.

New reports showing a 6.4 percent bounce in pending home sales and an 0.8 percent increase in construction spending heartened economists who are hoping for a healthy recovery.

They argue that a reservoir of pent-up demand built up during the recession, and that it will unleash itself as businesses rebuild their inventories, factories receive more orders and consumers make purchases they had put off over the last year.

“The potential significant growth rates is still there when you’ve knocked the economy down this far,” said William Cheney, chief economist at John Hancock Financial Services. “The normal historical behavior of the economy is, the harder you go down, the faster you come out.”

But dour signs still abound.

Manufacturing activity slipped in September, according to the Institute for Supply Management, even though it continued to expand, albeit not as rapidly as in August. Businesses said their new orders dipped from a month ago, and that production and prices fell, even as their inventories rose.

And in a troubling sign for the job market, the Labor Department said in a separate report that first-time claims for unemployment insurance rose 17,000 to a seasonally adjusted 551,000 last week.

The government is releasing its monthly report on unemployment Friday, and economists expect that the unemployment rate will rise to 9.8 percent from 9.7 percent, already the highest levels in 26 years.

Yet more support for the jobless recovery.

Share this post


Link to post
Share on other sites

Incomes went up 0.2%!

That is one huge increase right there. That extra 5c is going to make a massive difference.

“The market had gotten a little ahead of the economy,” said Wayne Wilbanks, chief investment officer at Wilbanks, Smith & Thomas in Norfolk,

“For the month of October we are on alert for a correction driven by the acknowledgment of a weak economic recovery.”

It always seems to go pear shaped in October :lol:

Edited by uptherams

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   296 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.