People around the country are spending less and less on goods, coinciding with a record low in new auto purchases in over six months. The economic downturn may be linked to the poor performance in Europe in terms of its unsure fiscal future.
The month of May marked the first time since December of last year that consumer spending remained at the same level, according to the Department of Commerce. This new downtrend has made a few economists change their outlook for the second quarter. Even larger banking institutions like Goldman Sachs have lowered their expectations from a 1.9 percent growth rate to a 1.6 percent rate.
The national decline is concerning because it coincides with a drop in fuel prices since its peak in April. Normally, a decrease in gasoline prices would bolster consumer spending. In the month of April, spending increased only a tenth of a percent. Some economists are attributing this latest downturn to a weaker job market overall. This might indicate that the economy isn’t improving, but rather stagnating.
In terms of household income, only a slight increase was seen in the month of May. Unfortunately, most consumers chose to put their additional income into their savings account rather than on spending it on merchandise. Larger purchases, such as homes and cars, fell as a result, with 0.6 drop since April.
The Federal Reserve may now have to further its actions to encourage public spending in the country.