🚀 go-pugleaf

What happened to that Obama economy?

The Commerce Department reported Monday that the growth of 
consumer spending slowed in March, further indicating the United 
States may be swept into Europe's recession and the ranks of the 
U.S. unemployed are swelling.

Tax increases are tightening purse strings. In March, consumer 
spending advanced a tepid 0.2 percent�much weaker than the 0.3 
and 0.7 percent registered in January and February.

Such a slow pace is hardly enough to sustain a robust recovery 
and other pressures could push the economy over the edge into a 
recession.

Extraordinary year-end bonuses and dividends�intended to dodge 
higher taxes in January�boosted consumer activity in January and 
February but now households are hunkering down.
Much weaker consumer spending is expected for the second quarter 
as the $120 billion January hike in payroll taxes and $45 
billion increase in income taxes borne by the wealthy weakens 
household finances.

In January, when a last minute tax deal raised social security 
taxes, working- and middle-class families could not adjust 
spending immediately�they have to keep driving to work and 
feeding their children�but in March retail sales fell 
precipitously. Now forecasters expect traffic at shopping malls 
to recover only slowly.

Many upper income families pay taxes on a quarterly basis, and 
the actual impact of the quite complex changes to the tax code 
and rates implemented in January were not reckoned until their 
accountants computed their first quarter payments due April 
15�now they are trimming purchases even further.

Also, the January tax changes greatly reduced mortgage interest 
deductions for high income families, and this will weaken demand 
for new and existing homes. The pace of sales may not be much 
affected but the price increases are likely to slow, especially 
outside of hot markets like Florida and New York, where 
speculators and foreign investors seeking refuge from 
uncertainty in Europe and China have been pouring money.  
Overall real estate inflation will not support real asset growth 
and rising consumer spending the balance of 2013 as it did last 
year.

Along with sequestration, higher taxes are subtracting more than 
$200 billion from household purchasing power and government 
spending�that is slowing demand for what Americans make and 
makes jobs tougher to find.

More than 40 percent of the 2.5 percent growth in first quarter 
GDP was supported by growing inventories�not final sales of 
goods and services. Overall, final demand is advancing at a pace 
that will support subpar growth of about 2 percent�perhaps 
less�for the balance of the year.

U.S. corporations are reporting weak sales growth, even as 
profits advance, but the cost cutting necessary to accomplish 
that dichotomy will result in continued slow hiring and perhaps 
a wave of layoffs.

Weakening conditions in Europe make layoffs more likely, and the 
danger that Southern Europe�s severe recession could spread 
north to Germany and across the Atlantic to the United States 
and Canada is quite real.

http://www.foxnews.com/opinion/2013/04/29/consumer-spending-
weakens-economy-inches-toward-recession/?intcmp=obinsite

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