Dow falls below 12,000; consumer spending declines
A report revealing the first decline in consumer spending since the Great Recession shocked Wall Street investors Tuesday and raised fears that the economy could fall into a double-dip recession.
“We are flirting with a ‘double dip’ recession,” said Jerry Jasinowski,former president of the National Association of Manufacturers, noting that economists and investors were surprised and horrified by the unexpected collapse of consumer spending.
The rare drop of 0.2 percent in personal spending in June followed two months in which spending adjusted for inflation also dipped into negative territory, the Commerce Department reported. Consumer spending is critical for the economy because it normally drives 70 percent of growth. Moreover, a dearth of jobs held down income growth to just 0.7 percent in the spring quarter and 1.3 percent in the past year, giving consumers little wherewithal to spend more even if they wanted to.