Saturday, February 11, 2012
Consumer Sentiment Falls More Than Forecast
Despite being out of the recession, consumers are still skeptical towards future spending. Bob Willis initially suggests that the rise in fuel price is part of the cause, but then expands to other factors such as a decline in exports in China, expectations for inflation and raise in incomes. The negative view for future may be causing a self for filling prophecy.
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3 comments:
This article comes up with some good conclusions of why consumers are still skeptical towards future spending. I think that consumers are just unsure about the future economy. Last summer, many people were nervous when the US almost defaulted. The unemployment rate has not decreased significantly, making people nervous about their job currently and in the future. Banks have been hesitant to give loans like they use to. People are nervous that they will not be able to get loans so that may be why they do not want to spend now.
I completely agree with Shannon, I feel the high unemployment rates also play a major role in low consumer confidence. Consumers aren't spending as they should with record low interest rates due to the lack of job security. Also it has been rumored that the Federal Reserve may increase interest rates which would be an incentive for consumers to save and decreasing spending even more.
I think that it is probable that consumer confidence will be low for quite some time, and I also think that people will not be spending the amount of money that the United States has been previously accustomed to. I think that Americans, in general, are going to be more frugal and increase their savings rate. Americans were spending over their means and that has a lot to do with why we got into this recession. Although, obviously consumer confidence returning to normalcy would be good for our economy. I believe that it may be good that Americans are saving more than we did overall in the 1990s.
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