Friday, March 29, 2013

Economy: Good News On Good Friday

This morning we got an early Easter present. The U.S. consumer department (which didn´t close on this Good Friday) reported that U.S. Consumer spending climbed in February by the most in five months ( Purchases rose 0.7% after a 0.4% advance the prior month that was bigger than previously estimate, wrote Bloomberg (bloomberg).

Those numbers are highly welcome. They show that the gains in (private) consumer spending are going to replace the shrinking public expenditures as the result of the federal budget cuts in the U.S. (sequester wikipedia). 

The numbers also are another proof that the U.S. economy is gaining strength. Consumer spending covers around 70% of the whole economy. As long as the consumers are increasing their spending revenues & profits of the companies will rise.

As in the months before the consumer spending has been financed by rising hiring by the companies which creates more income and by the positive wealth effects from climbing house prices and the ongoing rally on the stock market.

The climbing consumer spending will translate into further rising company profits which will lead to more hiring and continuing stock market gains. This leads to a virtuous circle which should keep the stock market rally and the economic upswing alive for many months to come.

No comments:

Post a Comment