05-02-07 by dugan
When I saw this week’s federal consumer spending report, which in a nutshell was up, but not up as much as in recent months, I knew one thing for sure: Everyone’s spending more on gasoline. Here’s a straight-up warning of what that could mean from economist Joel Naroff in consumeraffairs.com:
Reacting to government statistics showing consumers both made and spent more money in March, Naroff said he sees signs that high fuel costs are already causing consumers to curtail discretionary spending.
A closer reading of the numbers, he says, shows the only thing consumers bought more of in March was “non-durable” goods – in this case, mostly gasoline.
“Rising energy prices is the major factor behind that increase and after we adjust for inflation, we actually carted home fewer goods,” Naroff said. “Basically, the strong gains in income are being greatly eroded by the rising prices.”
What’s happening, says Naroff, is a disconnect between Federal Reserve policy makers and consumers. On one hand, the Fed looks at the numbers and decides inflation is pretty much under control. But consumers look at their fuel bill and decide to spend less on other things.
“On the inflation front, if you are a consumer, things are not good,” he said.