There were a number of good economic signs today, including increased personal income.
Consumers boosted their spending by the largest amount in six months and the back-to-school shopping season also got off to a strong start this summer.
It goes to figure that spending would be up, but what about the predicted "economic downturn"?
We've been hearing a pretty steady negative drumbeat about the economy from the media. Why?
The Commerce Department reported that spending in July rose by a healthy 0.8 percent last month, double the 0.4 percent gain in June. Incomes also were up, rising by 0.5 percent in July, reflecting stronger wage growth.
So, isn't this fairly good news?
Those two developments, released Thursday, offered hope that the current economic slowdown may be less severe than some had feared, notwithstanding a separate report showing a drop in orders to U.S. factories.
Now, maybe I'm picking at nits, but they're talking about an economic slowdown. When I'm driving, if I slow down, I'm still going forward - just not as fast. It's not a disaster.
Consumer spending is closely watched by economists before it accounts for two-thirds of overall economic growth. The government reported Wednesday that the economy slowed to an annual growth rate of 2.9 percent in the spring, down from a 5.3 percent surge in the first three months of the year, reflecting a sharp slowdown in consumer spending.
So 5.3 percent was a surge. Then you would expect things to throttle back down from a surge. Isn't that what we're seeing?
A separate report indicated that consumers continued spending in August with the nation’s big chain stores showing solid gains during the all-important back-to-school shopping period despite high energy prices and a cooling housing market.
So, is spite of record fuel costs, we still spent money. Especially on important things - like our kids. That's good, n'est ce pas?
“Although consumer sentiment has deteriorated, consumers are still spending,” said Nigel Gault, an economist at Global Insight, a private forecasting firm.
I'm not that concerned about "sentiment". I would say actual spending trumps "sentiment". Now, here's the one thing that concerns me.
The personal savings rate remained in negative territory for the 16th straight month at a negative 0.9 percent for July. That means that consumers spent all of their disposable income and dipped into savings or borrowed to finance spending in July.
My main point here is not to let all the "bad" news influence our decision-making. "Bad" news sells. Scary predictions increase viewership and readership. Live your life, manage your business, make prudent decisions based on facts - not news stories.
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