Sunday, Jul 30, 2006

Spending Less? You're Helping Slow the Economy

L.A. Times: Spending Less? You're Helping Slow the Economy

The cooling housing market does present a risk, and may be undercutting overall consumer spending as fewer people count on rising home equity to finance trips to the mall. Consumer spending grew by only 2.5% in the second quarter, down from 4.8% in the first quarter, mostly reflecting declining purchases of big-ticket items such as autos, according to the Commerce Department report Friday.

"People were selling part of their house to finance dinner at Olive Garden," said Dirk van Dijk, director of research at Chicago-based Zacks Investment Research. "You can play that game as long as the price of housing is going up. You take that away and it becomes a scary proposition."

Posted by little professor @ 11:43 AM (619 views)
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5 Comments

1. sirgoogle said...

Here in The Netherlands I've also noted a slow-down - and noticed a distinct (~10%) reduction in my own disposable income over the past 3-4 years.

Anyone got any personal observations on the UK ??

Sunday, July 30, 2006 01:42PM Report Comment
 

2. paul said...

It's the price of energy - it's affecting all of the advanced nations.

Sunday, July 30, 2006 02:32PM Report Comment
 

3. jason said...

"Any recession now is likely to be milder than those in the past, because many manufacturing jobs once the most volatile part of the economy have been outsourced"

So because the US has a smaller manufacturing industry they will have a milder recession when it comes? This is rubbish. Manufacturing brings real wealth, and reduces the country's deficit as they export more, meaning the country can rely on manufacturing during hard times!

Sunday, July 30, 2006 02:33PM Report Comment
 

4. bidin'matime said...

>>But she isn't cutting back on everyday needs, just changing where she shops. She's gone from shopping for her family at full-price stores to deep discounters, where she hunts for bargain bluejeans and handbags.

Thanks in part to consumers' ability to cope, most analysts expect annualized economic growth to remain 2.5% to 3% for the rest of the year. As long as consumer spending continues to grow by more than 1% and the Fed keeps inflation under control, a recession is unlikely, said Jan Hatzius, an economist with Goldman Sachs.<<

Maybe Ive got this all wrong, but I thought it was all about the amount of money consumers spend, not the amount of jeans and handbags they can accumulate If consumers spend less on the same goods, their ability to cope will not save the economy. Less money = less money, no matter how well its spent.

Sunday, July 30, 2006 04:09PM Report Comment
 

5. wannabemigre said...

Surely as Jason said real wealth is created by actually making something, whether it be a physical object or an idea, the current boom, as far as I can see, has been funded by the consumer buying goods on the high street that have to a greater extent been manufactured in the far east, the cash they used being supplied by the far east-they are the ones who run trade surpluses, not the west-via rising house prices aided by cheap money. If you take away the cheap money, and rising houses prices how will the western economies cope? We actually manufacture very little, it is cheaper to do it in the developing economies, to compund this we are actually in the process of exporting our service sectors as well-called outsourcing I think, while this is mainly limited to call centres, I dont think it will be very long before ambulance chasers cotton on that the office monkeys they use to process claims can be found in India also (accents allowing, which is the only reason that they not very successful yet) we can start exporting the service jobs as well. What will actually be left of the western economies?? No job, that has gone, no money, we have been running trade deficits, guess we will all have plenty of time to sit back in our mansions watching changing rooms, going on-line shopping buying our electonic goods on ebay direct from south east asia, and give ourselves a huge pat on the back about how good we have it:-) We dont have to work for a living anymore, oops, or maybe we have just become a third world country-no money, no skills, no jobs

Monday, July 31, 2006 02:42AM Report Comment
 

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