Thursday, February 21, 2013

The State of the Consumer

We all hear that seventy percent of our economy depends on consumer spending.  While the magnitude is an exageration, it is nonetheless an important driver of our economy.  As a dominant retailer, Wal-Mart is often used as a bellwether of consumer spending activity.  So news that Wal-Mart executives are worried about customer spending is raising some concern among analysts and journalists.  The Washington Post article (linked above) does a good job of offering possible reasons for weakness in the consumer sector.  What the article fails to mention is that it is possible consumers may have shifted their spending patterns, and we may yet see sales increase at other, higher end stores (not likely, but possible). Nonetheless, several factors are at play which may weaken consumer spending, principal among these being the reinstated payroll tax and higher gasoline prices.  Even so, my firm belief is that, while our economy is far from healthy, the trend of an improving economic climate is durable, and will continue.  Of course, I am known to be wrong from time to time.

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