The US Commerce Department released the latest consumer spending results this morning which showed that spending remained flat in April compared to an expected increase of 0.3 percent. This is the first time since last September that monthly spending did not increase.
The report also noted that incomes increased 0.4 percent for the second month, suggesting that consumers are rebuilding savings that many people relied on to make ends meet during the recession. Some analysts however, see an eventual return to spending once employment recovers to more typical levels.
“The consumer is going along for the ride but isn’t really leading the recovery,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “Because employment is growing, we’re starting to create some labor income and that is positive for future consumer spending.”
Source: Bloomberg
Yesterday’s vote of confidence in the euro by China which triggered a return of optimism in the markets, appears to be extending into a second day. Oil was just one beneficiary of the bounce back, reaching $75.21 a barrel in electronic trading on the New York Mercantile Exchange.
According to analyst Phil Flynn, “the market was beaten down so fast it doesn’t take that much to prop it up a little bit”, suggesting we could see crude prices continue to climb.
Source: Associated Press
The US economy grew 5.7 percent in the fourth quarter last year as measured by the Gross Domestic Product (GDP). This is the fastest quarterly growth in six years.
“Business are now feeling confident enough to deploy a larger portion of the recent strong corporate earnings rebound into new investment spending,” Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts, said before the report was released. “This is a key development to support a strong, non-inflationary recovery.”
Source: Bloomberg
The burden of making the tough decisions needed to make our country’s economy sound again falls on the sole body responsible for taxing and spending our money: Congress. For too long, Congress, under both Republican and Democratic leadership, has chosen the easy path of kicking the fiscal can down the road. Our elected representatives must now find the resolve to set aside partisan bickering and get us out of this frightful financial predicament.
The impulse to use Mr. Bernanke as a political punching bag raises the specter that, instead of doing the right thing, Congress may seek to pressure the Fed to print its way out of this crisis. We know from history that when fiscal authorities attempt to monetize their debts, the result is inevitably inflation.
Even before the Massachusetts election, there were several bipartisan proposals before Congress that recommended putting the Federal Reserve under congressional authority. These acts sound agreeable at first blush, but, as Winston Churchill once said, “In finance, everything that is agreeable is unsound.”
Source: WSJ
