U.S. Consumer Spending Decreases

U.S. retail sales are currently at the lowest point they have been in the period of nine months, an indication of how consumers are cutting back on purchases of nonessential items. Higher taxes and government spending cuts are two major factors for the 0.4% contraction of retail and food service sales, as well as the 2.2% decrease of spending at gasoline pumps last month. These changes have also been influenced by the 0.8% increase of food prices, with nearly a 22% increase in the cost of vegetables alone due to recent weather conditions in the Southwest. The producer price index reported today that prices for intermediate goods fell by 0.9% in March and prices of raw materials by 2.5%.

The Federal Reserve has been purchasing $85 billion in bonds every month in order to keep long term interest rates as low as possible. Several participants of last month’s meeting at the Fed voiced their belief that the central bank should begin to taper the stimulus package, although most people still support the program. The Fed has specified their persistence with the current monetary policy until the unemployment rate dips to 6.5%; after the weak job report last month, who knows when that will happen.

Evan Chang

Source:

The Wall Street Journal

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