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CNN Live At Daybreak
Consumer Spending Rises One Tenth of a Percent
Aired June 13, 2001 - 08:34 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
COLLEEN MCEDWARDS, ANCHOR: Some important financial numbers just out now and we want to give them to you, the figures for consumer spending in May. The number is up 0.1 percent. And that is up less than economists were predicting. It's an important number, a number that they watch, because it gives economists a sense of how much people are spending. And, of course, consumer spending has been really the engine that drove the economic boom of the 1990s. Last month in April, just so you know, consumer spending was up 1.1. So May up only .1
Let's figure out what all of this means. We're going to get more now from financial analyst Terry Savage of the "Chicago Sun-Times." Terry, shed some light on this for us. What's it mean?
TERRY SAVAGE, "CHICAGO SUN-TIMES": Well, you know that old saying, put your money where your mouth is? You can take all the surveys you want, but consumer spending on retail sales, the things consumers buy, is really the most critical number. It shows how much confidence there is out there. And as you said, the Street was expecting a three-tenths-of-a-percent increase. This is a minuscule increase and it will lead to fears that consumers, who have really been the ones holding up this economy -- after all, the technology sector, the industrial sector has been slow. Capital goods very slow. Consumers have been the engine and now it's clear they're pulling back.
Fears -- you can't blame them. Look it, another round of layoffs being announced, corporate earnings being reported as down. It, well, it makes you wonder if this is really a recession, if this V-shaped thing or U-shaped thing might just drag out a little bit.
MCEDWARDS: Yeah. And I mean can I push you a little bit on that? I mean is it a recession or not and how important is that label?
SAVAGE: Well, the label is important. You know, we've discussed it technically, two consecutive quarters of declining GDP, say the economists. But I think in consumers' minds what it is is their outlook for how much better will things get or what's my fear of losing my job. So it's been sort of flat for the last couple of months in terms of many of those statistics. But consumers are the ones that will make the difference in how this economy turns now.
One good thing here, we have the prospect, number one, of those small but significant tax refund checks coming in the mail. That could be a boost to consumer spending. It's certainly good old- fashioned Keynesian economy policy, put dollars in their hands and they'll spend it. The second thing is now we'll see in the second half your withholding amounts will drop to reflect that little bit of a tax cut. So that will put more dollars in pockets. And maybe it'll stimulate consumers to spend.
MCEDWARDS: So maybe you'll get some kind of stimulus in the months ahead. But I'm still curious about what you think happened between April and May, April up 1.1 -- what happened?
SAVAGE: Well, I'm not sure about it, but I suspected this when I started looking at the newspaper ads for Father's Day sales. Now, Father's Day has not been a big sales tool, maybe for men's clothes. It seems like everything's on sale early this year, summer merchandise marked down in the first week of June.
The good news for consumers is stores get it real fast. They're watching their sales and inventory numbers, and so there are huge markdowns coming for consumers. Well, you'll find every spring and summer bit of clothing on sale in the next two weeks.
I think what's happened is there's been no great news, not that there's been more bad news, but the news hasn't picked up, except maybe for this tax refund, and you'll have to wait till people put the dollars in their pocket.
My suggestion is you might want to save that money even though it won't help the economy because this tax bill is so complicated you'll probably be paying for tax advice next year.
MCEDWARDS: All right, Terry Savage, some good advice there and great analysis. Thanks so much.
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