Flat Consumer Spending Fuels Economy Fears

Inflation-Adjusted Report Shows No Gain; Weakest Two-Month Stretch Since Hurricane Katrina

(AP)  Consumer spending was essentially flat for the second straight month in January, raising new concerns about a possible recession in the U.S.

The Commerce Department said Friday that spending posted a 0.4 percent rise in January, which was better than economists had been expecting. However, all of that gain came from a surge in inflation during the month. Taking away the effect of prices, spending showed no gain in January or December.

Other than two negative months in August and September of 2005, which reflected the disruptions from Hurricane Katrina, inflation-adjusted consumer spending has not been so weak since November and December of 2001, when the country was struggling to emerge from the last recession.

Incomes in January posted a 0.3 percent increase following a 0.5 percent gain in December. However, the January performance was boosted by a number of one-time factors, such as big annual bonuses paid to business executives.

A closely watched gauge of inflation that is tied to consumer spending posted a 0.4 percent increase in January and was up 3.7 percent over the past 12 months, the biggest year-over-year gain since September 2005.

While the 0.4 percent rise in consumer spending before accounting for inflation was larger than had been expected, it is inflation-adjusted spending that is used to compute overall economic growth.

A flat reading in this category in December and January means that last year ended and the new year began on an exceedingly weak note, since consumer spending accounts for two-thirds of total economic activity.

Many economists believe that the country will slip into a recession this year, if the downturn has not already started. They are predicting that the slump will be a mild one and will end by midyear when the rebate checks from the recently passed $168 billion economic stimulus package start showing up in mailboxes.

However, more optimistic analysts believe it is still possible that the country will skirt by without a full-blown recession. President Bush told reporters on Thursday that he did not think the country was in a recession.

Federal Reserve Chairman Ben Bernanke signaled in congressional testimony this week that the Fed, which aggressively cut interest rates in January to try to stave off a recession, is prepared to cut rates further to shore up the economy.

However, the Fed's efforts may be constrained by a new surge in energy prices with oil jumping to a record this week above $102 per barrel.

Bernanke said the Fed is watching inflation carefully but at the moment believes that the threat from weak economic growth outweighs the risks from higher inflation.

[wardoglrs]

Milton Friedman answer''s, The problem with goverment

http://www.ideachannel.tv/

[arlt1627]

Has anyone considered another potential solution to the problem with our economy? Maybe the USA should try to gradually move back to an economy that actually produces products for exports (like we did in the late 1800s/early 1900s) rather than solely fixating ourselves on a "service" economy? American corporations continue to outsource jobs (and US production) solely to focus on bring cheaper products to our consumer economy. We''re left with a shrinking middle class, inflation, and no real change in sight!

[b-easy63]

"And in 2008, the International Council of Shopping Centers projects 6,000 stores could close as Americans decide what they can live without."



Don''''t worry retail stores!!!! Bush and the idiots (sounds like a band but it really is the name of the stupid Bushmeister and the idiotic, azz kissing Congress) are putting together a stimulus package to save you. It goes like this:

1. They borrow 161 billion dollars and give it to the low to mid income American taxpayers.

2. They beg the tax payer to forgo bills/debt and just go out and spend it all at your stores.

3. They have their fingers crossed that people are too ignorant or irresponsible to use the rebate for a bill and actually go out and buy a few things.

4. After each of them spends maybe 25.00 apiece at your store--you are stupid enough to see it as an incentive--and you go out and build new stores and hire lots of new workers to capitalize on the money that ...uhmmm...they no longer have...cuz they already...uhmmmm..spent it at your store.

5. Anyhoo. The plan is for all sides to ignore the dominoes falling and to plant yet another set at the end of the stack. Bush and the idiots only need this to work until Jan 29. 2009 after which (as far as Dubya is concerned) the economy can let ''''er rip.

[element51]

This all makes perfect sense...Bleed us dry then p*ss and moan because we aren''t spending enough money. What do they expect? Every time we go to the grocery store prices have gone up...not just on a few items but on everything. Our utility bills keep going up...just got notice that our utility company is raising it''s rates a flat 25% overnight. Gas for the car is now purchased 10 to 15 dollars at a time. Haven''t bought any new clothes for over a year. Making due with what we have. Forget going out to dinner once in a while. Vacation? No way! So, keep it up and the time will come when a CEO will have to learn to live on a measley 25 million a year. So sad!

[b-easy63]

Anyone hear today that the stock market plunged after Bush''s speech on there not being a recession?

It would seem that even on Wall Street, what ever Bush says is taken as an automatic signal to believe the direct and most extreme opposite. Proof positive, that except for his core group of Party faithful, everyone else is using the formula--if Bush says anything, the opposite must be true.

[kellyafische]

GMC layoff? Not a problem! $399.00 for a Shwinn LeTour 10 speed bicycle! No gas, great body, already at the "fuel" 7:30 for breakfast, bagel, bacon, sausage, milk, eggs, WAY under the price of gas! Winter? Throw on some boots and make the trip once every two weeks. $130 for a bike trailer I can make myself! How much land do I need? He! You can take an apartment balcony and tier plants in pots. Just layer them! And so much healthier than chemical mass produced stored for weeks until the right price comes in for green picked sour taste! We are doing good people. Let the banks starve! Fresh air, green grass, no time clock! No war! No weapons. They can''t afford it if we don''t give them our back to whip!

[kellyafische]

I can just see me sharing my garden produce with homeless persons. I can''t wait to wake up in the morning hurriedly have my coffe and breakfast with the kids and get them outside to plant pecan trees! And build a bridge over my creek so we can visit with the neighbors and help them build and earth sheltered home! We are going to feast and party and be warm! Our land will finally be ours! And our lives will have two laws. Love God, Love your neighbor as yourself! So Awesome good! Color and nationality won''t matter because Mexican food is so so good! And I can make some of my mom''s German food that she learned to make from her grandma who came to America on the ships! Foreigners! I love em! Bye bye corporate money grabbing 20 page contract rip off agreements with fine print! 2 laws! Love God, Love neighbor!

[kellyafische]

I am going to love it! In the 60''s there was art, there was pottery, there was leather shops, there was MOTHER EARTH NEWS MAGAZINE. People got together and started communes. (OK they failed) but the bottom line is I am going to trade my Alpaca for pottery and I am going to sheer my sheep and trade for leather boots, and it is going to be wonderful! Corporate downturn not economic is what is bugging bernanke! We the humans are goiing to thrive! On earth sheltered homes! On organic food we grow! On bartering. THIS IS A WONDERFUL TIME TO BE ALIVE!

[jwind11]

It''''s bad it''''s getting worse by the minute. My standard of living has gone down constantly for decades and it isn''''t getting any better.

Posted by skyk at 12:59 PM : Feb 29, 2008

Most peoples have gone up.....must be personal choices made...not the presidents fault

[kellyafische]

"I want a loan I want a loan! What''s in your wallet?" Nothing because the banks took it all...and smart guys figured they can hire an 18 year old for minimum wage why hire an over 40 yr old? OK! Save the economy? NOPE! Just give me green pasture ground and I will plant my own food and I will root cellar it over the winter and comb my Alpaca and spin my own yarn and weave my own sweater, and weave my own blanket and y''all can just forget me! I am now INDEPENDENT OF AMERICAN CORPORATE GREED. (Genisis 1, 2 Holy Bible)