Economists: Consumers Are Growing Increasingly on Edge

Sunday, 01 Jul 2012 01:29 PM
By Forrest Jones

U.S. consumers are growing increasingly on edge, which doesn't bode well for the economy, economists say.

Gasoline prices may be lower, but high unemployment rates and uncertainty in Europe are among the many things crimping consumer spirits, which isn't good, considering that consumer demand drives about 70 percent of the U.S. economy.

The U.S. Bureau of Economic Analysis reports that personal spending remained largely unchanged in May compared with April, while personal income rose 0.2 percent.

Meanwhile the Thomson Reuters/University of Michigan final index of consumer sentiment fell to 73.2 in June from 79.3 in May.

"Falling gasoline prices are helpful, but consumers cannot live on gasoline prices alone," says Chris Christopher, senior economist at IHS Global Insight, according to the Wall Street Journal.

"Americans are looking for better job prospects, a more stable global outlook, an effective legislative and executive government, and higher wage growth before they start spending more and feeling more confident."

The numbers don't bode well for second-quarter gross domestic product (GDP) rate, especially considering the country's GDP grew only 1.9 percent in the first quarter.

Other indicators point to an increasingly concerned U.S. consumer.

U.S. consumer sentiment fell by 5 points in the second quarter from the first quarter to 87, according to Nielsen, adding any reading below 100 indicates pessimism.

"Consumer uncertainty prevails with weak job gains, instability in global financial markets and continued budget issues at local, state and national government level," says Todd Hale, senior vice president of consumer and shopper insights at Nielsen, according to Reuters.
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Economists: Consumers Are Growing Increasingly on Edge