The consumers are saving and not buying and June spending is unchanged so whats next?

BIG BAD JOHN R. 2012/07/31 13:47:06
Yes, monetary stimulus is needed to shore up an economy that’s slowed for two straight quarters.
No, no way no monetary stimulus is needed.
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Consumer spending in the U.S. stagnated in June as Americans used the biggest gain inincomes in three months to boost savings, indicating a weak handoff to the second half of the year.

Household purchases, which account for about 70 percent of the economy, were unchanged after a 0.1 percent decrease the prior month that was previously reported as little changed, a Commerce Department report showed today in Washington. The median estimate in a Bloomberg News survey of economists called for a 0.1 percent rise. Incomes rose 0.5 percent, lifting the savings rate to 4.4 percent, the highest in a year.

The results may raise concern limited job prospects are causing Americans to pull back, crimping sales at companies such as Coach Inc. at the same time business investment is cooling. Federal Reserve policy makers meet today and tomorrow to determine whether more monetary stimulus is needed to shore up an economy that’s slowed for two straight quarters.

“We have a consumer that’s obviously a lot weaker,” said Eric Green, global head of foreign exchange, rates and commodities at TD Securities in New York. “The labor market is not really

Inflation Adjustment

Adjusting consumer spending for inflation, which renders the figures used to calculate gross domestic product, purchases dropped 0.1 percent, the most since August, after a 0.1 percent increase in the previous month, today’s report showed.

Spending on durable goods, including automobiles, was unchanged after a 0.4 percent drop. Purchases of non-durable goods, which include gasoline, fell 0.4 percent. Spending on services was unchanged.

The Bloomberg survey median called for incomes to rise 0.4 percent in June. The 0.3 percent gain in May was revised up from 0.2 percent.

The saving rate increased from 4 percent. Wages and salaries climbed 0.5 percent after a 0.1 percent gain.

Disposable Income

Disposable income, or the money left over after taxes, increased 0.3 after adjusting for inflation. It rose 0.5 percent in the prior month.

The June results indicate the consumer was losing steam as the quarter drew to a close. Household spending rose 1.5 percent from April through June, the slowest pace in a year, Commerce Department data showed last week. Gross domestic product climbed at a 1.5 percent annual rate, cooling from a 2 percent pace in the prior three months.

Retailers’ results foreshadowed the weakness. Sales fell in June for a third straight month, the longest period of declines since 2008. Same-store purchases rose less than analysts’ estimates at chains like Target Corp. (TGT) and Macy’s Inc. (M)

Americans’ moods remain dim. The Bloomberg Consumer Comfort Index fell in the week ended July 22 to the lowest level in two months. The Thomson Reuters/University of Michigan final gauge of sentiment dropped in July to the lowest level of 2012.

July Employment

Later this week, the Labor Department may report payrolls advanced in July by 100,000 after rising 80,000 in June, according to the Bloomberg survey median. Unemployment probably held at 8.2 percent for a third month. The rate has exceeded 8 percent for more than three years.

Progress in reducing the jobless rate probably will be “frustratingly slow,” Bernanke told lawmakers in testimony this month. He also said the central bank is “prepared to take further action as appropriate to promote a stronger economic recovery.”

Coach, the largest U.S. luxury handbag maker, reported fiscal fourth-quarter revenue that trailed analysts’ estimates. Sales at North American stores open at least a year advanced 1.7 percent, compared with a gain of 10 percent a year earlier.

Some companies are holding up better. Cheesecake Factory Inc. (CAKE), which runs casual dining restaurants, projected annual per- share earnings that exceeded analysts’ forecasts and said second- quarter revenue got a boost from more customer visits.

Guest counts “are still growing for our concept,” Chief Financial Officer Douglas Benn said on a July 25 conference call with analysts. “I don’t see that much difference in the macro environment that’s causing me concern. I think it has been and continues to be and probably will continue to be for a while a very sluggish and slow recovery.”

An index of inflation tied to spending patterns increased 1.5 percent from June 2011. The so-called core price measure, which excludes food and fuel, rose 0.2 percent from the prior month and 1.8 percent from the same month last year.

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  • raine 2012/07/31 21:38:56
    No, no way no monetary stimulus is needed.
    We already had stimulus and nothing good came of it, I had to spend all of my money buying fuel oil. Other people did the same and lots went to gasoline for cars. Maybe if they must stimulate the economy, it should be just food tickets or only American products, just try to find some :) .
  • sjalan 2012/07/31 15:15:39
    Yes, monetary stimulus is needed to shore up an economy that’s slowed for two...
    BUT IN THE FORM OF REAL JOBS!!!! Like the jobs bills sitting in the Senate that the Republican/Tea baggers have held hostage for the last 36+ months.
  • Devil's Advocate 2012/07/31 15:13:47
    Yes, monetary stimulus is needed to shore up an economy that’s slowed for two...
    Devil's Advocate
    The lack of consumer demand is the biggest issue facing the recovery of the western economies. We are in a 'general glut'
    Extension of tax credits, tax relief for the working and middle classes and lowering of VAT are all important however I am not convinced this crisis has a fiscal solution as of yet. There are a lot of economists who claim that the western economies are working to productive capacity but Im not so sure.
  • Reichstolz 2012/07/31 14:09:45
    No, no way no monetary stimulus is needed.
    When you remove money from the economy to spend it in the economy, how is that stimulative? That is the fallacy of Keynes's philosophy. Taking money from one pocket and moving it to another stimulates nothing but the hand that is doing the action.
  • BOOGIE-WOOGIE-MUSIC-MAN-ROC... 2012/07/31 14:05:45
    Yes, monetary stimulus is needed to shore up an economy that’s slowed for two...
    For sure, consumer spending is very very necessary. but people are beginning to realize that it's less expensive for family vacations to be spent at a state park as opposed to Disney land. and who wants to attend a show room circus just to buy a new car? that's just about as productive as going to Walmart, to buy clothing that does not fit.
  • Reichstolz BOOGIE-... 2012/07/31 14:10:45
    How does removing money from the economy, and spending those dollars in the economy, stimulate it?
  • BOOGIE-... Reichstolz 2012/08/01 04:28:00
    Not only are people saving that money but the spending is wise and thrifty.
  • Reichstolz BOOGIE-... 2012/08/01 06:04:50
    Exactly as any responsible person should always do. The days of living beyond your means, for the dullards, are over.
  • BOOGIE-... Reichstolz 2012/08/01 11:03:04
    I agree. I think, with kids starting back to school, and then the holiday season will be approaching, the spending will come back up. and, this has been a really unusually hot summer. so I would believe that the utility companies are really getting the business at this time. but, I believe everything will work out fine.

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