Jim, ECB dropped rates 1/4 point and the US markets are now testing the April lows. Perhaps a technical necessity. (You never did get back to me about the gap fill.)
I think weak hands have been shaken out and we're going to see some stability. More selling would be as Bernard pointed out, panic selling.
<Retirees who tend to be big spenders are no longer getting 6% to 7% on their money market money... Their income has dropped dramatically, not to mention huge stock market losses in their 401k's and other retirement accounts... This could put a big dent in spending going forward... Combine that with the cloud of growing layoffs about to weigh on consumer confidence, and you have the makings for a deflationary period in real estate prices and a broad range of consumer goods and services...>
Good points. Americans won't be buying automobiles or eating out as much or buying a new PC, but they'll still be spending.
Consumer Spending
biz.yahoo.com
biz.yahoo.com
Thursday August 30, 4:19 pm Eastern Time
The Commerce Department on Thursday reported that consumer spending, which fuels two-thirds of the economy, edged up 0.1 percent last month to a $7.085 trillion annual rate.
While that was the lowest monthly gain since a matching 0.1 percent increase in October of last year, analysts said it was still enough to keep the economy above water.
``Consumer spending is remaining on a moderate track and it would appear that the consumer is going to continue to support the overall economy,'' said Lynn Reaser, chief economist with Bank of America Capital Management Group in St. Louis.
The start of tax-rebate check disbursements in July helped boost income and will likely continue to do so in August and September when the bulk of the rebate checks are mailed out.
In its report, the department said personal incomes grew by 0.5 percent in July to an annual rate of $8.786 trillion, the biggest increase since a 0.6 percent gain in December of 2000.
Markets largely shrugged off the data, with stock prices sharply lower on gloomy corporate news.
Disposable income, funds available to consumers after taxes, rose 1.7 percent in July after a 0.3 percent gain in June, bolstered by the tax rebates, lower tax rates and other one-time government payments.
Excluding those factors, disposable income gained a more moderate 0.3 percent during the month, the department said.
``Even excluding tax rebates, income gains remain strong and that should help sustain consumer spending and keep the economy going,'' said Joel Naroff of Naroff Economic Advisers in Holland, Pa.
BETTER DAYS AHEAD?
While consumer spending in July was down from June, largely because of a fall-off in spending on durable goods items like automobiles, economists still greeted the report as good news for the coming months.
``We may have escaped the worst part of the slowdown and going forward things could get a lot better,'' Naroff said, noting that tax rebates will put more money in consumers' pockets.
``That should be enough to carry the economy through. People have the money to spend and while they are not tearing up the mall spending it they are still out there,'' Naroff said.
Back-to-school spending will also help, he added.
Still, analysts caution that slipping consumer confidence as job layoffs continue to mount and the employment picture weakens, could put a crimp on spending in coming months.
``We seem to be at a critical turning point,'' Reaser said. ''August and September will be critical to see if consumers have spent a greater share of the after-tax funds that they now posses.''
A separate government report on Thursday showed a slight decline in first-time claims for jobless benefits. But the number of workers on benefit rolls remained at its highest level in nearly nine years, according to the Labor Department.
A separate survey from a private research firm on Thursday showed help-wanted advertising holding steady in July.
The Help Wanted Advertising Index, which gauges changes in the supply of jobs across the nation, remained unchanged at 58 in July but was far lower than its reading of 82 in July last year.
That index, published by the New York-based Conference Board, highlighted the weak job market.
``Declines in all major regions of the country underscore the soft job market and suggest that employment levels could decline for some businesses this fall,'' said Ken Goldstein, an economist at the Conference Board.
SAVING RATE HIGHER
Meanwhile, with income growth outpacing spending, the personal saving rate, which measures savings as a percentage of after-tax income, rose to 2.5 percent in July from 1.0 percent in June. It was the highest rate since 2.6 percent in June 1999, the government said.
``There is something saved for a rainy day,'' said Ken Mayland, president of ClearView Economics in Pepper Pike, Ohio. ''The story is that consumers sustained a moderate pace of consumer spending growth.''
Last month's gain in income was higher than expected. Economists in a Reuters poll forecast, on average, incomes would grow 0.3 percent while personal consumption would rise 0.2 percent.
The price index for personal consumption expenditures, a key barometer of inflation, fell 0.1 percent in July after gaining 0.2 percent in June, leaving few worries of inflation and scope for the Federal Reserve to cut interest rates further if needed to spur the economy.
The Fed has cut rates seven times already this year. |
