AND THE ECONOMIC BEAT GOES ON – AT 9:17 A.M. ET: Well, as they say, it doesn't rain, it pours. More economic bad news has come in, and it doesn't portend well for the future.
WASHINGTON (AP) — Americans cut back on their spending in June for the first time in nearly two years and their incomes grew by the smallest amount in nine months, a troubling sign for an economy that is barely growing.
Consumer spending dropped 0.2 percent in June, the Commerce Department said Tuesday. Excluding falling prices for such items as energy and food, consumer spending would have been unchanged in June.
Incomes rose 0.1 percent. It was the weakest growth in income since September, reflecting anemic hiring this spring.
Stock futures were trading lower after the report was released.
High gas prices and unemployment have squeezed household budgets this spring, leading to tepid overall economic growth in the April-June quarter. The economy expanded at an annual rate of 1.3 percent in the second quarter after only 0.4 percent growth in the first three months of this year. The combined growth for the first six months of this year was the worst since the recession ended two years ago.
Many Americans are cutting back on purchases of cars, furniture, appliances and electronics. Consumer spending is closely watched because it accounts for 70 percent of economic activity.
Employers have responded by reducing hiring. The economy added just 18,000 net jobs in June, the fewest in nine months. The unemployment rate rose to 9.2 percent, the highest level this year.
The government issues its July employment report on Friday.
Declining growth and rising unemployment have raised concerns that the country could fall back into a recession.
COMMENT: Fall back? Really? When are we going to end the fiction that the last one ended? I know what the technical definitions say, but maybe it's time to revise those definitions. Talk to anyone out there – small business people, manufacturers – and they'll tell you the recession has been ongoing. Now we have the prospect that it will get worse.
The political implications can be profound, but only if the Republicans nominate a candidate with real appeal, a saleable platform, and a coherent party behind him or her. Remember, a poor choice of candidates played a major role in denying the GOP control of the Senate in the 2010 elections. It can happen with the presidency next year.
August 2, 2011