For the first time in a while, there is some good news for the U.S. consumer and for companies that rely on consumer spending. One booster is the rapid recovery in stock prices, with the Standard & Poor’s 500 index jumping 47 percent since its low point in early March.
“Clearly, there is a wealth effect,” says Keith Hembre, chief economist at First American Funds. As Americans feel wealthier, they may be more willing to spend. Though, Hembre warns, the housing market remains weak, meaning Americans’ investment portfolios may look better but their real estate holdings are looking worse. “While the stock market has gone up, home prices have continued to head down,” he says.
But, economists say, there are signs the broader U.S. economy is bouncing back from its sharp contraction in 2008 and early 2009. “It is increasingly looking like the recession ended in May or June,” John Ryding and Conrad DeQuadros of RDQ Economics wrote in a note Aug. 3. The day before, former Federal Reserve chairman Alan Greenspan told ABC, “I’m pretty sure we’ve already seen the bottom.”
Housing Market Stabilizing
On Aug. 4, the Commerce Dept. said consumer spending rose 0.4 percent, after a revised 0.1 percent increase in May. The rise was boosted by spending on nondurable goods [anything that doesn’t last five years or more], which were up 1.7 percent in June.
For the housing market, there is mounting evidence that conditions are stabilizing, too. Data released Aug. 4 showed U.S. pending home sales advanced 3.6 percent in June.
Another positive for the U.S. consumer is efforts by the federal government to stimulate spending. Ford Motor said Aug. 3 that the “cash-for-clunkers” program was a big factor in its first monthly sales increase in almost two years. Ford’s total sales [including fleet] rose 2 percent for July. The U.S….