Low Spending Is Taking Toll on Economy

[cal04]

http://www.nytimes.com/2008/05/01/business/01econ.html?hp
For months, beleaguered American consumers have defied expert forecasts that they would soon succumb to the pressures of falling home prices, fewer jobs and shrinking paychecks. Now, they appear to have given in.

On Wednesday, the Commerce Department reported that the economy continued to stagnate during the first three months of the year, with a sharp pullback in consumer spending the primary factor at play.

Pressures on households in which cash is tight appeared to weigh significantly in the calculations of the Federal Reserve as it rolled back interest rates Wednesday for the seventh time since September — this time by one-fourth of a percentage point — in a bid to prevent a further falloff in the economy.

The Fed made clear, though, that investors and borrowers should not expect another drop in interest rates anytime soon. In the statement accompanying their action, policy makers said they believed that with the short-term rate at 2 percent, they had already unleashed enough economic stimulus to “help promote moderate growth.”

[Nitrogenica]

1. "Growth" that benefits the investment class will not fix the economy.

[Captain Angry]

2. With the way people were spending,

there may not be anything left to buy!

Malls and stores were so busy a couple of years ago, you'd think people were buying extra televisions, just in case.

[TNDemo]

3. Tennessee is a good example.

Tonight the governor announced we had a $550 million dollar budget shortfall and an "unspecified" (translation: buttload) number of state employees were going to lose their job. With housing prices down and foreclosures up, property tax revenue is way down. We also don't have a state tax, just a 9.25% sales tax, as our means of revenue, and with gas and food so high no one is spending on anything else.

[JDPriestly]

4. Low and no wages are taking their toll on the economy

You can borrow up to a certain point, and then you have to choose either to limit purchase to the bare necessities or become homeless. Most people prefer to cut their spending. There will be no improvement until America starts producing stuff and, in the process, creating high paying good jobs.

[lib2DaBone]

5. I agree..but they said on CNBC...

Stocks up 189 Points today. Spending is up because people are paying more for Gas and Food. This is good. See? The recession is over! Because George Bush says it is over. "You don't go to war with the Army you wish you had, you go to war with the Army you have".. Donald Rumsfeld.

AP
Stocks rise as dollar advances on optimism about US economy
Thursday May 1, 4:52 pm ET
By Madlen Read, AP Business Writer
Wall Street advances, following the dollar rise, as optimism increases about the US economy http://biz.yahoo.com/ap/080501/wall_street.html