Consumer Spending Looking Strong

One of the big drivers in the economy is consumer spending. A big hit to consumer spending can have serius consequences for economic growth. And with the recent run up in interest rates, the creative mortgages, and so forth, there has been some concern about consumer spending this holiday season. However, it looks like consumer spendin will be strong.

Keeping the nation’s cash registers ringing, consumers boosted their spending in November by the largest amount in four months, raising hopes shoppers will act more like Santas than Scrooges during the holidays.

That’s important — not only to retailers but also to the economy at large. Consumers are a major force shaping overall economic activity.

Thus far, they seem to be holding up fairly well to the strains stemming from the real-estate bust, where owners have anxiously watched the value of their homes either drop or not go up anywhere near as much as they had during the housing boom.

The Commerce Department reported Friday that consumer spending rose 0.5 percent last month. That was up from a 0.3 percent gain in the previous month and was the strongest showing since July.

Also, incomes rose by 0.3 percent as well. This is good in that it indicates that consumer spending will hopefully remain decent. It could even be that the economy will weather the slow down in the housing markets and that the expansion will slow, but not stop.

FILED UNDER: Economics and Business,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Original Article syndicated via RSS from Outside The Beltway | OTB

  2. Bandit says:

    What’s spening?

  3. bains says:

    Thus far, they seem to be holding up fairly well to the strains stemming from the real-estate bust, where owners have anxiously watched the value of their homes either drop or not go up anywhere near as much as they had during the housing boom.

    WTF? Why is it that so many pundits insinuate that we are in really tough times when most of the data says otherwise?

  4. Consumer spending picks up in November

    Showing some holiday cheer, consumers boosted their spending in November by the largest amount in fo…

  5. Steve Verdon says:

    Bains, because the data says that the economy is slowing and in particular real estate/housing. Further, if you look at the past, many recessions had their start with a decline in the housing market. That doesn’t mean things are going to Hell in a handbasket, but the economy is slowing. This is what the data says. And it isn’t just pundits, but professional economists.

  6. bains says:

    Steve, I don’t dispute that the slowing of new sales/turnover in the housing market is an indicator of a slowing economy. Rather it is the wording in this article that ticks me off. “…[T]hey seem to be holding up fairly well”; it is miraculous that the consumer hasn’t lost confidence in an economy that some are predicting will crash and burn last year, this year, and next year. “…[T]o the strains stemming from the real-estate bust…” Real-estate bust??? Where, and when? I happened to be invested in real-estate in 1982, in a community that is relatively recession-proof, and saw my investment decrease in value 40% – that my friend, was a bust. “…[W]here owners have anxiously watched the value of their homes… not go up anywhere near as much as they had during the housing boom.” That folks are not seeing double digit increases in their real-estate values is a far cry from a bust. To imply so is more revelatory of the authors biases than of market trends.