News In Brief

Real reason behind consumer spending rise?

Lilly Fowler May 17, 2010

The Los Angeles Times is reporting that those who are feeling optimistic about the economy given the uptick in consumer spending should, perhaps, take note of the kind of folks who are out there shopping.

According to the newspaper, it’s two sets of people doing the bulk of the spending: the rich, and those who have stopped making payments on their mortgage, thus having more cash in their hands.

Point being — the economic recovery would be on stronger ground if it were a broad base of the middle class spending, rather than these smaller pockets of people confident enough (or reckless enough) to shop.

Mark Zandi, chief economist at Moody’s, was quoted in the article, saying, “The economy can grow if lower-income households aren’t able to spend, but it can’t flourish.”

The key to getting the middle class to spend according to the article? Continued job growth and higher wages.

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