Consumers are confident. So why aren’t they spending?

Mitchell Hartman Feb 13, 2015
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Consumers are confident. So why aren’t they spending?

Mitchell Hartman Feb 13, 2015
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Consumer sentiment is now at the same level as it was in 2004, well before the Great Recession hit. The University of Michigan Consumer Sentiment survey for February (preliminary) will be reported Friday, and the consensus among leading economists is that the measure will move modestly higher — to a reading of 98.5, compared to 98.1 in January.

“The American consumer is doing better, maybe paying down some debt, spending more,” says economist Chris Christopher of IHS Global Insight.

But consumers still aren’t on a spending spree. Retail sales in January were up only 0.2 percent after excluding volatile cars and gasoline (the figure was -0.8 percent including cars and gasoline). In December, spending (excluding cars and gasoline) didn’t rise at all.

“Median household income, adjusted for inflation, is still approximately 7 to 8 percent lower than it was in 2008,” says Christopher. “There are a lot of Americans who live paycheck to paycheck. Lower pump prices are helping them spend on higher food prices, which have been relatively elevated over the past year.”

Economists don’t expect consumer spending to rise strongly until wages across the income spectrum begin increasing at a faster pace than inflation, month after month.

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