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U.S. Consumer Spending Dives Sharply

by RB2D2 / August 3, 2004 1:15 AM PDT

For sure I'm putting that diamond bracelet on hold! Sad


WASHINGTON (Reuters) - U.S. consumer spending took a much deeper dive than expected in June as shoppers cut back on purchases of expensive items like autos amid slowing income growth, a government report showed on Tuesday.

Personal spending dropped 0.7 percent in June after climbing 1 percent in May, the Commerce Department said. Adjusted for inflation, spending plunged 0.9 percent.

http://wireservice.wired.com/wired/story.asp?section=Breaking&storyId=902544&tw=wn_wire_story

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Re: U.S. Consumer Spending Dives Sharply
by Mary Kay / August 3, 2004 1:40 AM PDT

Part of the reason might also be the rise in mortgage
rates. People bought when rates were low on adjustable loans. Now that they are going up, their budgets can't accomidate the increase.

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Actually ...
by Evie / August 3, 2004 1:44 AM PDT

... if you look at the 2004 Average Rates the rates haven't really gone up much in the past month or so. I think it's the gas prices. I know spending $40/week more on gas cuts into the money for extras.

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That's what I don't understand
by RB2D2 / August 3, 2004 3:14 AM PDT

Why would a person take out an adjustable mortgage when the rates are so low? It stands to reason the only way rates can go are up. I have friends that did this and now they worry about the increases. They have already had their payments go up because of an increase in taxes AND insurance.

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Re: That's what I don't understand
by Mary Kay / August 3, 2004 3:18 AM PDT

Yes I agree . I never understood it either. And of course Evie is correct also, The gas prices also put a damper on the budget.

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Two possible reasons:
by Paul C / August 3, 2004 3:37 AM PDT

1. The auto industry has sold between 9.5 and 11 million cars in each of the last 4 years, with the exception of 2002. Maybe the market is saturated?

2. June is usually the time that the farsighted remember that the little darlings go back to school in August. Want to bet that a lot of those PC's and car down payments became backpacks, clothes and loose leaf binders and the rest simply not spent?

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