Today's tough economy has created a new consumer.The U.S. consumer of 2009 has adopted new behaviors. The U.S. Commerce Dept reports that consumer spending in December was down for the sixth month in a row. The month's consumer spending is down 1%, while income is down only .2%. Energy prices are at an all time low, leaving cash in everyone's pockets.
What does this mean? More savings. This is due to the rising risk of unemployment, cut in hours and the decrease in home prices. The risks and uncertainties of today's economy are prompting Americans to hold on to their money. Historically low interest rates are enabling many to refinance their home. The Christian Science Monitor reports that Beth Byrne, a Boston-area resident, saves around $200 a month from a home refinance. She isn't planning on spending this money soon, either. The money is staying in the bank.
When is the U.S. consumer of 2009 going to rebound? Many economists feel the end of 2009 will boast a trend of increased spending, however, there is high uncertainty. A Diageo/Hotline poll in late January reveals 43% of Americans believe it will take between 2-4 years in order to get the economy back on track. President Obama agrees that the economy will take years to restore.
A rise in consumer confidence will ultimately increase spending. Tax cuts proposed by a stimulus plan in Congress will ultimately help reduce the decline in employment, and anything in place to help stop the decline in home prices will restore consumer confidence. Bank recovery policies that anticipate an end in the economic recession will increase investor's sentiment, thus increasing consumer confidence as well.
No comments:
Post a Comment