http://money.cnn.com/2012/03/30/news/economy/income-spending/index.htm?iid=SF_BN_River
It
is reported that the consumer spending rose 0.8% compared to January, which is
the biggest one-month jump since July of last year; after adjusting for inflation,
spending increased by 0.5%. Compared to a 0.2% increase in income in the same
period, it indicates that consumers are/were more willing to spend and it is a
good sign for economic recovery. According to this article, spending on durable
goods rose 1.6% in February, which was driven by strong auto sales as
automakers reported the best new-car sales in four years. Moreover, spending on
nondurable goods, such as food and gasoline, rose 0.9%. This increase is
virtually due to the higher prices of commodities. However, spending on
services, such as airfare and cable TV, grew only at a moderate rate at 0.4%. The
overall increase in consumer spending is 0.8%.
Furthermore,
as reported in this article, the job markets have created more than 200,000
jobs in February, and this improvement has helped lift overall income. Stuart
Hoffman, chief economist with PNC Financial, believed that the estimated rise
in income is likely to be higher in coming months, as more people now have
jobs. Additionally, as mentioned above, the increase in spending on nondurable
goods is virtually due to higher prices of commodities such as a higher price
of the gasoline. Hoffman believed/said that “at least in the February numbers,
it does not appear that higher gasoline prices are deterring consumers.
Instead, they [consumers] appear to be lowering their saving in order to
finance their spending. As the labor market continues to improve, income growth
will allow consumers to boost spending” To conclude, the aggregated effects/phenomena
as mentioned above are a good sign for the economic growth.
3 comments:
This is good for the economy, as long as people continue to want to and be able to spend money the economy will works its way back.
I think this is largely an encouraging sign. I am concerned however about the decrease in savings rate to compensate for the increased spending. While it's a positive sign that consumers confidence has gone up, savings also provide an important security net.
Although the gain in income was lower than predicted, it is good that it is continuing to increase. The economy is not recovering as fast as everyone would like, but the fact that spending continues to increase is encouraging. Also, the fact that consumers are dipping into their savings to spend more is encouraging, because it seems that they are starting to trust the market again.
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