Thursday, January 31, 2013
Consumer Spending
This article talks about how the rate of consumer spending has slowed, while income has risen by 2.6%. Economists also predict that consumer spending will drop this year, due to the increase in taxes (specifically, Social Security). Do you think that this decrease of consumer spending will have a large impact on businesses? What about unemployment?
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It seems a little concerning. If Americans are making more money but spending less it could definitely have a negative impact on the economy which in turn would have a negative effect on unemployment rates.
ReplyDeleteIt is an interesting thing to think about. Perhaps we could be seeing a shift in Americans MPC. We have always been a nation that spent at a high rate. It has been reported that as much as 1/3 of American citizens live pay check to pay check. Perhaps this number is dropping and people are being more fiscally responsible after the recent crash. That I think is the best outlook I can offer given this report.
ReplyDeleteIt doesn't make much sense that income is the highest it's been in years and consumers aren't spending. It's probably a response to expectations of higher taxes. This also might trigger long term consumer saving
ReplyDeleteAgree with Travis on the change in American habits. The financial crash and in particular the realization of overspending in the American Economy was a wake up for many consumers, I do not think we will see an increase in national savings, a plus for future investment.
ReplyDeleteI think we will see an increase in national savings*
DeletePersonally, I know my parents/family is going to be cutting back on spending because of the higher taxes. The article ends fairly positive, talking about home prices and auto sales, so I guess this may contribute to why the title of the article has "raises little concern" in it. Nonetheless, this topic does still concern me: I don't think the cut in spending is healthy for the economy. Like Abby said, if American's make more and consume less, that is concerning.
ReplyDeleteUS has applied an austerity policy. That is why the government spending has dropped. However, the idea to increase taxes and the volatile economics has generated instability in the consumer's expectation.
ReplyDeleteI also want to talk about Moral Hazard in unemployment. Some people still let at government expense. I think the government should generate some stimulus that improve the labor market, without paternalistic policies.
I think it might have some sort of impact on employment and businesses. With austerity increasing in America, consumers are going to have less money to spend. Also, with people making less because of more money taken out for taxes, they're going to have to budget their money more efficiently in the future. Maybe Americans are becoming smarter and started saving when the talks of raising taxes started.
ReplyDeleteConsumption will decrease in the next year because of the tax raise, but I think the issue here is what Travis stated above, that American's habits are changing in response to the coming events. I think in the next year we will see an increase in national savings as well.
ReplyDelete