Financial Focus: Consumer spending up 0.4%
Do Consumers Rule?
Anthony Rivieccio, MBA, PFA
Let’s remember one important thing ! In our country, the consumer rules. Over 70 percent of Gross Domestic Product is determined by consumer spending.
Gross domestic product expanded at a 1.2 percent annualized rate from April through June, after a first-quarter gain of 0.8 percent Commerce Department data showed last week. Growth is slow, but moving.
So, what are consumers spending money on? Cars and homes! Those are BIG purchases can definitely improve one’s economic life if you have the income to spend?
Disposable income–the money left over after taxes–increased 0.1 percent after adjusting for inflation. It was little changed from the prior month.
The saving rate declined to 5.3 percent from 5.5 percent. Wages and salaries advanced 0.3 percent following a 0.2 percent gain.
So, for the last two months, Spending went up, while incomes stayed flat. Wages rose slightly and savings declined So where did the big money purchases come from? Consumer debt!
Among other spending details, household outlays on services rose 0.3 percent after adjusting for inflation. The category includes tourism, legal help, health care, and personal care items such as haircuts, and is typically difficult for the government to estimate accurately.
Spending on durable goods, which includes automobiles, increased 0.4 percent after adjusting for inflation. That followed a 0.1 percent drop. Spending on non-durable goods, which include gasoline, rose 0.3 percent for a second month.
My friends, this could develop into a dangerous pattern as our nation rolls into November. If we are not using our real money for big and small ticket purchases (partly because all our money is used up) this pattern could get our economy in the longer term to pause or even fall.
For big purchases, we apply for a bank loan or mortgage. For small purchases, use that credit card.
My clients ask me all the time to talk politics. I tell them I speak economics. After all, it’s my job to make sure they achieve their financial goals.
So in my mind, the biggest question for our nation–whether you are Democrat, Republican or Green–is: “How do we get America economically moving again, without debt leading the way?”
It is not for me to judge, but for you. The Government tells you you’re strolling along economically, all the while your money is really stuck in the mud.
Anthony Rivieccio is the founder & the CEO of The Financial Advisors Group, celebrating its 20th year as afee-only financial planning firm specializing in solving financial problems. Anthony, a recognized financial expert since 1986, has been featured by many national and local media including: Klipingers Personal Finance, The New York Post, News12 The Bronx, Bloomberg News Radio, Bronxnet, The Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Bronx News and The Bronx Chronicle.
For financial assistance or a FREE 2015 Investment Analysis. Anthony can be reached at (347) 575 5045.
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