Consumer Spending

I read an article concerning the likelihood of consumer spending falling in 2006. The main reason for this is a decrease in the housing market. A recent trend has been for homeowners to refinance their home and then take the money made in doing so and spend it on whatever they would like. However, with the interest rates raising, refinancing is not as appealing as before. Another reason for the prediction of consumer spending falling in the near future, is that income levels are not growing as quickly as before, therefore employees are making less money. When they make less money, then they have less money to put back into the market. Overall, this report was somewhat pessimistic. One positive point was that the labor industry is adding approximately 180,000 jobs every month. I wonder if this is taking the relief efforts of Katrina into consideration. Even if that is the case, it is still a good thing being that it reduces the unemployment rate. By reducing the unemployment rate, the country's morale is boosted. Despite the slowing real estate market (on a national level), I believe that there are plenty of other avenues one can take in order to make sufficient funds to keep pumping money into the market.

1 comment:

Dr. Tufte said...

I think this is all Chicken Little talk. Did you notice that there is little mention of the possibility that consumer spending won't decline because there may not be a decline in the housing market? If you say things that are pessibimist enough eventually you have to be right.