The markets slid yesterday on news that U.S. consumer spending increased by 0.3% in March, while income rose 0.4% over the same time frame. This is the first time since December we’ve seen income rise faster than spending.
I can’t say I am entirely surprised.
As prices for “must haves” like gasoline and food continue to rise, consumers are digging into their savings to cope. This is not small potatoes, given that the average family saved a mere $38 out of every $1,000 in take home pay last month, according to the U.S. Commerce Department.
I can’t help but have huge concerns about Team Bernanke’s plan; no amount of stimulus is going to overcome the struggle most families are having – which is to boost savings and shed debt.
Here’s the thing… if consumers can’t save, then they can’t buy. And if they can’t buy, they can’t build up the nation’s wealth, which is predicated on consumer spending.
All three sets of figures in isolation really don’t tell you much. But when taken together – spending, income, and GDP – they suggest our economy is too weak to put millions of Americans back to work, much less in jobs for which they are appropriately qualified.