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Consumer Spending Threatened by High Prices and Lower Wages
Consumer spending, which accounts for more than 70% of the economy, will be seriously threatened in the months ahead, as prices continue to rise, wages plateau, and government stimulus checks wear thin.
Consumer spending has remained strong in recent months, even jumping 0.8% in the month of May. But that boost was largely inflated by the $50 billion in government rebate checks that were cashed and put to use in the month.
The stimulus will total $107 billion this fiscal year, but that may not be enough, as consumer prices are rising across the board. The consumer price index (CPI)…
22Jul2008 | Money Morning | Comments Off | ContinuedStimulus Checks Push Retail Sales Rally; Economy Still Facing Uphill Battle
Stimulus checks helped send retail sales up 1% in May, the Commerce Department said yesterday (Thursday), bolstering the dollar and lifted the mood on Wall Street.
But the effects may not last, as unemployment continues to rise and crude oil supplies tighten.
Record high gasoline prices padded the report, but purchases still increased in every other sector. Gasoline sales jumped 2.6% last month and have gained 13.8% in the past year. Excluding gasoline, sales still climbed 0.8%.
“Yes, we bought a lot more gasoline as prices skyrocketed,†said Joel Naroff, president and chief economist at Naroff Economics Inc. “But the sales gains…
13Jun2008 | Money Morning | Comments Off | Continued
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