Today’s numbers on personal spending and consumer sentiment make it clear that the American consumer, who has been supporting the economy through thick and thin for 7 years, has given up for the time being. Davis Wyss, Chief Economist at Standard and Poor’s, told me today that “people are scared.” Faced with skyrocketing prices for food and energy, falling home values, and the general sense of gloom every day in the news headlines, spending as adjusted for inflation is flat for the last three months. And consumer sentiment has turned down sharply. As reported by the Reuters/University of Michigan survey, it is now at a 16 year low.
When does it end? Many economists look to the second half, after the Fed’s latest interest rate cuts trickle down and those tax rebate checks arrive in the mail.
