Title: Economic News: The Good and the Bad
The Good News: Construction Spending Up in June
According to the Department of Commerce, construction spending increased in June 2009, albeit only by 0.3%. Still, analysts were surprised, having predicted it would fall 0.5%. Despite the increase, construction spending was down 10.2% from June of 2008.
The good news is that gains were seen in both residential and non-residential sectors—which has only happened three times in the past twelve months. And, June’s increase was the second in three months. Some of the increase can be traced to the federal government’s economic stimulus program.
Economists called the numbers an indication that the housing sector may be recovering from its long downward slide.
For the first six months of 2009, construction spending amounting to $455 billion, which is 11.4% below the same period in 2008.
The Bad News: Consumers Not Spending Yet
So while the June construction numbers are helping some economists breathe a little easier, what’s the outlook for the rest of the year? Economic forecasters don’t know what to expect, since the biggest driving force in economic recovery—consumers—are difficult to predict.
Consumers are saving more in response to recession fears—and experts say it will take several years for them to totally dig out from under the weight of job losses. There are still 14.7 million workers without jobs in the U.S., according to the Bureau of Labor Statistics. The more money Americans save, the less they spend—and since consumer spending accounts for 70% of American economic activity, any slowdown in spending is serious.
The big question: are Americans going to remain thrifty, or will they tire of doing without and begin spending again when confidence—and jobs—return? A recent report shows consumers will not return to spending any time soon. Consumer confidence declined in July, based on a sample of 5,000 households, which indicates that consumers are pessimistic about their income and spending expectations.
So while we have a mixed bag of economic news today, at least it wasn’t all bad!
Source: U.S. Dept. of Commerce, The Wall Street Journal