Article brought to you by: Catholic Online (www.catholic.org)
Consumers spending less, spurring recession
By Catholic Online (NEWS CONSORTIUM)
July 29th, 2012
Catholic Online (www.catholic.org)
July 29th, 2012
Catholic Online (www.catholic.org)
Economic creeped on by in the second quarter as consumers spent at their
slowest pace in a year. Uncertain times call for tighter purse strings,
and so consumers are spending less. The Federal Reserve is being
encouraged to do more to stimulate the recovery.
Foreign trade remained stagnant and stocks of unsold goods grew ever higher. Coupled with signs that activity slowed further in the third quarter, these figures supported the argument that the Fed should provide stimulus at its September meeting.
"The economy has lost altitude and flying pretty close to stall speed. Monetary policy is the only game in town and additional easing is highly likely," Economics Professor Sung Won Sohn at California State University Channel Islands in Camarillo, California said.
The weak economy could be the decisive factor in President Barack Obama losing out a second term in office when Americans go to the polls in November. Obama's approval rating on the economy has slipped.
An Ipsos/Thomson Reuters poll showed 36 percent of registered voters believe Republican candidate Mitt Romney has a better plan for the economy, compared to 31 percent who had faith in Obama's policies.
The statistics tell a discouraging tale. The economy's expansion following the 2007-09 recession is the slowest since the 1980-81 periods and the recession itself was the deepest in the post-war period.
There is no major policy announcement is expected at the Fed's two-day meeting next week. Many economists say that the central bank could launch a third round of bond purchases, also known as quantitative easing on September 12-13.
The U.S. central bank has already injected $2.3 trillion into the economy through asset purchases and overnight interest rates are near zero.
Not all economists think the Fed will pump more money into the economy in September. They say that the slowdown in growth was not that special. They said the Fed would want to save its limited arsenal for a real crisis.
"The Fed will pull the trigger on QE3 if the sense is we are getting into trouble, but if we are just weak and somewhat limping forward, they will prefer to stay pat," Adolfo Laurenti, a senior economist at Mesirow Financial in Chicago says.
"They do not want to use whatever ammunition they have left too soon, they want to keep some just because things might get even worse later on."
Deep government spending cuts and higher taxes are scheduled to kick in at the start of 2013, as well as troubles from the debt crisis in Europe.
The chief economic fear is that the politicians in Washington will be unable to avoid the so-called fiscal cliff at the turn of the year.
© 2012, Catholic Online. Distributed by NEWS CONSORTIUM.