The Economic Perfect Storm That’s Killing Consumer Spending

June 7, 2011 05:35

Consumers, who are central to solid and sustained growth, are at the heart of the new worries. Their pullback is a big reason why the economy is slowing down, and it’s not just because of high gas prices.

By JAMES C. COOPER, The Fiscal Times


Consumers are struggling. The housing market is in worse shape than ever, and manufacturing is fading. Economic growth is far undershooting the upbeat expectations at the beginning of the year, even as global growth is slowing sharply. Now, amid new signs that job growth is cooling off, the first-quarter’s weakness is extending into the second quarter, and economists are once again ratcheting down their 2011 forecasts. Is the recovery in trouble?

The bad news on jobs is sure to weigh heavily on consumer confidence in coming months. Americans are already “angry and nervous” about the economic and fiscal issues facing the country, according to a recent poll by Newsweek and The Daily Beast. By almost four-to-one, people say government is not solving our economic problems, the survey shows, and by almost seven-to-one Americans say the economy is not delivering sufficient job growth.

The record low for home prices in March is a sign that any housing recovery is still a long way off, and that massive policy efforts haven’t helped.

During the recovery, which is nearly two years old, overall spending by consumers, businesses, governments and foreign buyers has grown at a tepid 1.8 percent annual rate, and the pace slowed sharply in the first quarter, to 0.6 percent.


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