Consumer spending drops to seven year low in U.S.

By SiliconIndia   |   Friday, 28 November 2008, 07:55 Hrs   |    2 Comments
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Bangalore: Terrorism and slowdown takes a huge toll on U.S. economic activities, with a study by Commerce Department pointing that the consumer spend cuts are at the steepest rate in more than seven years, since the 9/11 attacks in U.S. Consumer spending fuels two-thirds of U.S. economic activity.

The continuous attacks of the credit crunch and the increasing job losses have resulted in a straight fall in the ability and willingness of the mass to be on a spending spree. Infact, apart from them, the tumbling household wealth has triggered a tremendous fall in the consumer confidence, the rate of which is considered to be 28 year low. The final index reading of confidence for November fell to 55.3 from October's 57.6, lowest since 1980. The index came in well below economists' expectations of 57.7, according to the median of forecasts in a Reuters poll, and deteriorated sharply since the middle of the month, when lower gasoline prices had cheered many consumers.

The dramatic decline is clearly visible as orders for expensive durable goods like cars, machinery and computers dropped by 6.2 percent in October, more than twice as much as Wall Street economists had forecast. Commenting on the fall in demand in every sector, Director of currency research at GFT Forex, Boris Schlossberg said, "The durables are not a pleasant number. It's horrid across the board."

However, a report from the Labor Department pointed that new claims for jobless benefits fell by 14,000, though that still left claims at a seasonally adjusted 529,000, well above levels that economists typically associate with recessionary economic conditions.

The report also showed that the weak data pushed U.S. government bonds higher in price and the U.S. dollar was down against the yen. Infact, even the business barometer of the Institute for Supply Management-Chicago fell from 37.8 to 33.8, which was predicted to shrink to 36.7.

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