Consumer demand is being crippled and remained weak for the third month in a row after U.S. consumer spending was flat in February after adjusted for inflation. Real consumer spending however rose 0.1% but still not enough to help the suffering U.S. economy. Since consumer spending is about 70% of the U.S. gross domestic product, itÃ¢â‚¬â„¢s a driver and measure of the economy's well being.
Inflation, falling housing sector and a diminishing labor force are catching up to the economy adding more weight and pressure to growth as it causes a significant slowdown to the extent of a recession. Surprisingly, inflation has moderated in February as core PCE, the Feds favorite inflation measure, rose 0.1% from a previous rise of 0.3% reading in January. The annual core prices inclined 2% taking levels back within the Feds comfort zone.
As for income, nominal incomes rose unexpected to 0.5% in February compared to the projected rise of 0.3% on the backs of government transfer payments. After-tax, inflation-adjusted income inclined 0.3% as well marking the largest real disposable income increase since last August.
Ironically, spending on durable goods in fact rose for the first time since September by 0.2% when the durable goods orders fell by 1.7%!! Something doesn't quite add up! Real spending on non durables though dropped 0.1% being the third consecutive decline.
In a different report, the University of Michigan released its confidence final reading for the month of March revising it down to 69.5 from the preliminary reading of 70.5 indicating that confidence is diminishing as consumers start to lose faith in their economy.
The status of the U.S. is still blurry as spending is most probably to come in flat for the third quarter while inflation during the previous month has eased to remain within the Fed's comfort zone. This still doesn't change the fact that Americans should admit it and face reality! It's time to wake up and smell the recession ladies and gentlemenÃ¢â‚¬Â¦