Consumers More Confident Than Businesses As Uncertainty About The Fiscal Cliff Continues To Grow

Thursday, November 08, 2012 00:54
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Consumers More Confident Than Businesses As Uncertainty About The Fiscal Cliff Continues To Grow

Tags: economic indicators | investor behavior | world economy

US businesses may lack confidence to risk hiring in the current environment but consumers are stepping up to the plate with confidence in the economy.
 
The strength in consumer spending may provide a much-needed bridge until a solution for the fiscal cliff can be decided upon. It puts a floor under the heretofore fledgling recovery and signals the expansion will continue.

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The Conference Board and Thomson Reuters/University of Michigan show household optimism is at a four-year high. A separate Bloomberg measure says confidence is the highest since early 2008.
 
American consumers are also increasing their debt levels. Borrowing for education and automobiles increased in September according to figures from the Federal Reserve.
 
Furniture and electronics makers say consumer demand for commissioned projects is quite strong. But decisions to actually enter orders to begin those projects are less so.
 
People are waiting for some type of resolution of the fiscal cliff. Once an agreement has been made, business confidence will improve, companies will begin hiring, and consumers will feel even better about spending.
 
It’s not that the fiscal cliff has to be completely resolved. But some type of credible plan must have been identified and agreed upon.
 
And consumers with money in their pockets are less likely to give up consumption of goods and services in anticipation of bad times.
 
Household purchases increased to a 2% annual rate in the third quarter and growth in gross domestic product (GDP) also rose to a 2% pace, beating estimates of 1.3%.
 
A credible plan to resolve the debt crisis would improve the world economy as well as growth in the US.

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