Consumer Spending Drops For The First Time In 17 Years
It was a record setting run. Seventeen years without a drop in consumer spending. The previous record was 11 years, so pretty much we were due for a drop anyway given the cyclical nature of our economy.
WASHINGTON - The U.S. economy contracted at a 0.3% annualized rate in the third quarter, as consumer spending declined at the fastest pace in 28 years, the Commerce Department estimated Thursday. The drop was close to economists’ expectations that the economy would shrink 0.5%. Final sales to domestic purchasers fell 1.8%, the largest decline in 17 years. Consumer spending dropped 3.1%, the first decline in 17 years and the biggest drop in 28 years, while business investment fell 1%. Investments in homes fell for the 11th straight quarter. Inflation-adjusted after-tax incomes fell 8.7%, the largest quarterly decline since the record-keeping began in 1947.
This isn’t good news, but it wasn’t unexpected either. Consumer spending has a lot to do with consumer confidence, and with the financial crisis and the housing market crash people just aren’t feeling very confidence now. And for good reason.
But this recent economic woe should stand in stark contrast to the nearly eight years of relative economic growth and prosperity that we’ve just enjoyed. And while the left is going to blame Republicans for this, it’s worth noting that the economic woes that are making consumers worried were caused by big-government liberal policies.
If not for government policies pressuring lenders into giving loans to people who could not pay them, and if it weren’t for two government entities (Fannie Mae and Freddie Mac) owning over half of our $12 trillion mortgage market, we wouldn’t be in this mess.
