Economists have projected very little, if any, growth in consumer spending in the New Year. It has been apparent in the economy that people have been stretching themselves to pay for holiday gifts, not to mention necessities such as food and rent. Because consumer spending is about 70% of the economy, the projected stagnation does not look promising for growth in general. The reasons for the slow movement have been as a result of static incomes, the tough job market, and the minimal growth in job opportunities. The turmoil in the stock market also seemed to contribute, resulting in a “household wealth decline by $2.4 trillion.” Along with the aforementioned factors of the slow moving market, “buyers distress” also seems to be playing a role, with people still paying back debt from loans and not being able to borrow more money. Allen Sinai, the chief global economist at Decision Economics, even forecasted that there would not be growth “anywhere near our growth in previous post recession periods.”
The consumer market seems to be a vicious circle, with people being more and more frugal with their money and yet scraping savings to pay for necessities. What will it take for us to get out of this slump?
4 comments:
I read somewhere (I think it was a Yahoo! article) that some big companies are going to lower their products' prices in the coming year for competitive purposes. Hopefully that will get people buying more and bring up our economy.
There's something about Serena's comment that I have to disagree with. If a company cuts the cost of a product, then they'll also have to cut the expenses it takes to manufacture the product. Ultimately, by doing so, they also cut the amount of money that goes back to the employees and circles throughout the economy. If a company decides that they will lower the prices of their good, but keep manufacturing costs the same, then maybe this could stimulate the economy a bit. Otherwise, I can only see this causing more problems in the future.
Going off of what Jennifer said, lowering prices but keeping manufacturing the same would definitely help boost the economy. However, that seems unreasonable. If companies don't make a profit from their sales, it's high unlikely that they will lower their prices. Rather than keeping those low prices definite, why not try having sales more often. I'm not saying companies should have a sale every other day, but a huge sale every month would persuade consumers to buy more. This would surely help stimulate the economy.
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