Consumers Spending More

WASHINGTON – Consumers opened their wallets and pocketbooks a bit more in June, increasing their spending for the second straight month while saving a bit less, even as incomes fell sharply.

Consumer spending is closely watched because it accounts for about 70 percent of total economic activity. The increase could provide a lift to the economy, but may be hard to sustain if incomes continue to fall.

The Commerce Department said Tuesday that consumers boosted their spending 0.4 percent in June, slightly ahead of analysts’ estimates. That comes after spending rose 0.1 percent in May.


16 Responses to “Consumers Spending More”

  1. 1 Dave Crider August 4, 2009 at 8:58 AM

    Now that is encouraging, between this, Ford’s improving sales figures and Alan Greenspan saying that he felt that the economy had already bottomed out and starting to climb again, it is really looking like better days are ahead. But of course with all good news there is always bad, watching a video at Marketwatch from the link provided with this article he stated that due to problems with the buy out of GM they may have to lay-off thousands more. I thought the government bailout there was supposed to prevent any further job losses at GM.

  2. 2 Abby August 4, 2009 at 10:30 AM

    Yes, this appears to encouraging, but it fails to take into account various factors that could counteract hopes for a timely recovery in the economy:

    1. Spending increased only 0.4% from the previous month, and this small increase was primarily driven my spikes in gasoline prices. The claim that “consumers are spending more” may be true when looking at general data, but most other industries are still suffering huge losses.
    2. The 0.4% rise is measured relative to the previous month, but adjusted for inflation spending actually fell 0.1%, as gasoline was hitting a price peak in late June.
    3. In conjunction with this increase in consumer spending, income dropped more significantly. Personal income decreased at a seasonally adjusted rate of 1.3% compared to the month before, and additionally, wages, salaries and transfer payments all fell.

    So, as a previous post suggests, watch what you read! When we fail to examine the big picture, articles like this can be misleading.

    Here’s a more comprehensive account of the situation:

  3. 3 James Dugger August 4, 2009 at 3:51 PM

    I agree with Abby. I also wanted to add this article below showing that retail stores are not getting better.

    I guess we all have to take a step back and look at the big picture. There are some positive signs coming out, but it is going to be a long road. It would be nice to have a quick recovery and everyone being pulled up with it.

  4. 4 Alejandro Cortez August 4, 2009 at 8:57 PM

    Yes the small rise in consumer spending for the month of June is good news. We should, however, treat this with caution and not make hasty proclamations. It will be a good idea to monitor consumption rates for the next five months and compare them with last year’s figures. If the figures continue to be positive then we can let out a collective breath. I know it is tough to hear, especially when people are having trouble finding jobs and paying bills, but we have to be patient. Changes rarely evolve rapidly, and when they do they are usually temporary. The decisions and actions that got us into this mess took years of accumulating, so we should not be surprised that the road to recovery will be a long tough road. With this in mind, however, I do like seeing signs of recovery, even if the percentage increases are small.

  5. 5 Jessica Tsai August 4, 2009 at 9:21 PM

    As Abby mentioned, it is necessary to keep in mind the context and bigger picture of news articles when we read them. Regardless of the news, the media tends to present figures depending on how they want audiences to react and it is easy to be mislead by information that either does not portray the entire picture or leaves out certain crucial information. Moreover, good news is always in high demand, especially when the economic situation is so negative. Consumers and producers alike are extremely willing to accept good news these days and it is important to read carefully in regards to articles that depict good or bad situations because the real scenario is likely to contain more figures and be more complicated than it is painted.

  6. 6 Evangelina Alvarez August 4, 2009 at 9:27 PM

    This is similar to the post about how sales went up, specifically car sales, but what others noted was that prices have gone up with gas which may be part of that. Although lately, gas prices have gone down and maybe with increased spending and a decrease in prices, we can get out of this hole. Considering incomes are falling, I’m actually surprised though that people are spending. This could be a sign that people are putting their faith and money into getting out of our mess.

  7. 7 Juan Balderas-Econ 101 August 5, 2009 at 10:39 PM

    Another indicator that the economy isn’t looking as rosy as this article portrays is the continued high unemployment rate. Listening to NPR earlier today, I heard an economist that in cases like this unemployment is actually a leading indicator of further hard times as companies anticipate lower revenues by cutting personnel. As everyone has pointed out, it’s easy to pick and choose your information to portray a doomsday scenario or the end to the recession depending on what you prefer.

  8. 8 Maricar De Los Reyes August 5, 2009 at 10:49 PM

    The first article related to this stated consumer confidence is key to consumer spending. But that confidence is at its low because of the huge monthly layoffs. It would’ve made more sense for the government to give the bailout money for banks instead to the people. The money that was for loans and security, was instead pocketed by the higher-ups of the banks. The money didn’t come down to us. If it had, I am sure we would’ve spent more, therefore increasing consumer spending and helping raise the economy.

    Here’s a link about banks giving large bonuses to employees with the bailout money.

  9. 9 Kittygirl707 August 6, 2009 at 10:08 AM

    I would guess that the slight increase seen in June might have had to do with school ending and summer beginning… I know that a lot of families are doing “staycations” rather than traveling. This might mean the purchase of a BBQ, lawn furniture, wading pool, or other backyard items to make it more fun for the kids to be at home. I personally added some new seat cushions and had guests over for two separate gatherings to celebrate the beginning of summer. Perhaps more people are doing the same? I feel good about the decision as well as I’m spending my money locally and helping Napa store owners.

  10. 10 Hailey Cook August 6, 2009 at 10:40 AM

    Yay! This is very positive, the more we get out there and spend, while in the short run jobloss may be increasing, in the long run, we will need to increase the amount of workers hired to continue to supply the amount of goods demanded, simple, but very uplifting for Americans.

  11. 11 Heather August 6, 2009 at 10:51 AM

    This is positive, and in the long run, yes this will yield positive results. But consumers should spend cautiously. There is no more need for credit card debt, and overspending. What Americans need is a lesson is in wise and careful spending, not just living with the notion “spend spend spend.”

  12. 12 Kittygirl707 August 6, 2009 at 11:41 AM

    @ Heather:
    Only too true!! Overspending is a huge piece of how we got ourselves into this mess. Americans need to be extremely careful to not get caught up in the hysteria of “consume mass quantities” that the late 90s saw. Yes, technology boomed and everyone wanted new widgets but, come on, how many electronics goods do we all need? And why do we need a new car every couple of years? Greed should not be the primary indicator of our nation’s economy…

  13. 13 Patrick Powers August 6, 2009 at 4:26 PM

    Well yea, summer is the time for shopping. As most people are on vacations and what not, which means more and more shopping. And that why there are a lot of sales at the different shopping brand stores, trying to lure in on oncoming vacationers and kids/teens. I wonder what the percentages of the ages of the people who are shopping are…

  14. 14 marie moussa September 15, 2009 at 9:16 PM

    It is hard to believe that consumers opened their wallets and pocketbooks a bit more in June especially after hearing on T.V about people who can not afford to buy food for their family. Some believe that spending more will provide a lift to the economy. The question remains; how can we accomplish that when our country is facing a big number in unemployment?

  15. 15 Evan Schlinkert November 29, 2009 at 2:33 PM

    This is quite surprising to me because .3 percent jump over experts opinions is quite a large number. The only thing that I can think of is that people were purchasing more summer clothing, and summer equipment. This is very encouraging to hear that people are willing to spend more, but now that it is almost December, I wonder what the numbers are like now with the holiday seasons coming up.

  16. 16 eldiel December 2, 2009 at 11:18 PM

    More spending is a good thing if people have money to spend. Hopefully its the boost the economy needs to start turning at full force again. Now with the holiday season, and black friday/cyber monday money should be flowing from around the cycle again.

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