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August 08, 2006

Consumers slow down

Consumer spending is the driving force of the U.S. economy, but N.C. State University’s Mike Walden says there are signs that the steam is coming out of this force.

“Consumers account for about two-thirds of all spending in the economy, so this is a sector that economists and others pay a lot of attention to, says Dr. Walden, an economist with the North Carolina Cooperative Extension Service.

“And what we have seen in recent months is a fairly consistent trend of retail spending going up, but in each successive month it’s going up at a slower rate. So what we are interpreting this to mean is, yes, consumers are spending more, but they are beginning to slow down that rate of spending.

“And we think again that this is as a result of higher interest rates that the Fed has passed along to us, making it more expensive for consumers especially to borrow money and then spend that money. And again this is exactly what the Federal Reserve has desired.

“So I think this is another piece of evidence that suggests that as we move into the second half of the [year] the economy will continue to grow, but it will grow at a much slower rate.”

Posted by deeshore at August 8, 2006 03:06 PM