Income, spending point to a turnaround
TEXT OF INTERVIEW
BILL RADKE: The government says personal income rose in November at the fastest pace in six months. And our spending increased as well. So, how pleased should you be?
Let’s bring in Richard DeKaser, president of Woodley Park Research, joining us live from Washington.
Good morning, Richard. How’s your driveway?
RICHARD DEKASER: Uh, driveway’s looking good. It took us a couple days to dig out here in D.C., but we’ve done it. The only downside is my back has reminded me of a few muscles I didn’t know I owned.
RADKE: Yes, it’ll do that. So what type of … Well, first of all, income and spending both up. How does that make you feel?
DEKASER: Well, I think it’s pretty good. It tells us that the consumer is maybe not the cheerleader for the economy, but they’re definitely in the game. Given so many adversities — given the difficulty obtaining credit, for example, and the big wealth losses over recent years — I think that’s pretty encouraging that they’re still in the game.
RADKE: Any kind of buying especially surprise you?
DEKASER: Yeah, what was interesting in the month of November is that we saw a lot of what would be characterized as discretionary spending purchases. Automobiles and the like, for example. Those are typically not the sort of things that people take on unless they’re a little bit more positive about their prospects or the prospects for the economy more generally.
RADKE: But how much of this spending seems to be coming on credit?
DEKASER: Oh, very little, very little. Maybe even none. In fact, people have been paying down their credit card balances for the better part of the past year and a half, to a record degree in fact. So, this is not inconsistent with the depiction of a consumer that’s generally conservative, but they’re spending out of income, and that’s exactly what November produced.
RADKE: And I asked you about your snow pile. How are retailers digging out?
DEKASER: Well, it’s clear that they’ve suffered a setback. You know, we had this major blizzard in the Northeast Corridor over the weekend, and there’s no question that took a toll on sales. But people seem to be coming back in the game. Online sales, in particular, seem to be responding. People are shopping for bargains. And as we’ve seen over the years, increasingly that’s pushing them later and later into the season. So even if it goes past Christmas, I’m optimistic that what was lost during the storm will largely be made up.
RADKE: That’s Richard DeKaser, president of Woodley Park Research. Thanks a lot, Richard.
DEKASER: My pleasure.
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