Consumers Weary of Keeping the Economy Afloat 08/19
Continuing weakness in the labor market and rising mortgage rates continue to strain the backbone of the economy -- the consumer.
The latest University of Michigan Consumer Sentiment Survey shows that overall consumer sentiment for August fell to 90.2 from 90.9. The current conditions index, which measures American's perceptions of their financial situation and whether it's a good time to make purchases, fell to 100.5 from 102.1. The expectations index, a measure of optimism about the next one to five years, fell to 83.6 from 83.7.
The University of Michigan's findings underscore last month's Conference Board Consumer Confidence Survey, which plummeted to 76.6 -- its lowest level in four months.
And this drop in confidence is already having an affect on consumer spending. Wal-Mart Stores recently reported that consumers are spending only 15% of this year's tax cut compared to 25% of the rebates Uncle Sam sent out two years ago.
Also, credit card usage fell by $400 million in August, according to the Cambridge Consumer Credit Index. And the Federal Reserve reported that consumers paid down their credit at an annual rate of 0.2% in June.
Conclusion: Consumer spending, fueled by massive interest rate cuts and tax rebates, kept the economy afloat during the recession while business spending went under. But now that consumers are holding back and businesses are not in a position to pull their weight, the economy will continue to struggle to keep its head above water.
Continuing weakness in the labor market and rising mortgage rates continue to strain the backbone of the economy -- the consumer.
The latest University of Michigan Consumer Sentiment Survey shows that overall consumer sentiment for August fell to 90.2 from 90.9. The current conditions index, which measures American's perceptions of their financial situation and whether it's a good time to make purchases, fell to 100.5 from 102.1. The expectations index, a measure of optimism about the next one to five years, fell to 83.6 from 83.7.
The University of Michigan's findings underscore last month's Conference Board Consumer Confidence Survey, which plummeted to 76.6 -- its lowest level in four months.
And this drop in confidence is already having an affect on consumer spending. Wal-Mart Stores recently reported that consumers are spending only 15% of this year's tax cut compared to 25% of the rebates Uncle Sam sent out two years ago.
Also, credit card usage fell by $400 million in August, according to the Cambridge Consumer Credit Index. And the Federal Reserve reported that consumers paid down their credit at an annual rate of 0.2% in June.
Conclusion: Consumer spending, fueled by massive interest rate cuts and tax rebates, kept the economy afloat during the recession while business spending went under. But now that consumers are holding back and businesses are not in a position to pull their weight, the economy will continue to struggle to keep its head above water.
