First Quarter results are out and the news is not good- the U.S. Economy is continuing to struggle in nearly ever sector, despite government attempts to stall the economic crisis in it’s tracks.
As the government buys more bad assets (mortgage debt) and companies like Ford struggle to avoid a government bailout that would cost taxpayers even more money, it is no surprise that consumer confidence remains in a slump while inflation continues to rise. And, unfortunately, according to White House Chief Economist Christina Romer, it looks like this spiral downward is going to continue for at least one more quarter.
What is surprising is that, while consumer confidence remained flat in March, it rose sharply in April and as a result overall consumer spending rose in this quarter. Consumers increased their spending on not only high priced goods, like cars and appliances, but also on everyday items like clothing, shoes and recreation. These aren’t purchases of necessity, and suggest that consumers are starting to buy again.
This is a good sign for the economy, as in the last half of 2008, spending had the sharpest decline since the 1980’s. While this news has resulted in a temporary bump in the stock market, stopping the steep decline of the stock market and leaving investors with only moderate losses, it is not enough to suggest that our economy is on the fast road to recovery.
Better sales and inventory correction are two components that will help put a stop to the recession and put the economy back on firmer footing, so this increase in spending is definitely a good sign. The same is true for the $103.7 billion dollars in inventory correction that occurred in the last quarter.
However, despite these positive signs, recovery doesn’t appear to be on the horizon because the good news is overshadowed by the bad. Residential construction had the largest decrease since 1970, plunging by 38%. Sales of U.S. Goods to foreign buyers also plunged, as the global economic woes caused foreigners to limit spending. And jobless rates are still on the rise.
While Obama hangs his hope on tax cuts, and the creation of government jobs, other factors including the outbreak of Swine Flu and the continuing credit crunch also reinforce the notion that this isn’t going to end any time soon.
Coupon Artist
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