Approximately 2/3rds of the economy is based on consumer spending so a 1% increase last month, as reported by the Commerce Department, shows improving consumer confidence. Consumer confidence doesn't rest on purchasing power alone but how consumers feel about the economy and their prospects for the future. When consumers are confident they can maintain employment and their incomes they are more willing to purchase items then if they are fearful. Optimism and fear seem to be the two main components here. When people are confident they want to spend and enjoy life but when they are fearful they want to hang onto their money. The increased spending is a risk of current reward versus future risk. People typically scan their options and prospects about the future based on the subjective impressions, news, friends opinions, and jobs to determine whether or not a purchase is possible. In many cases it is as much a "hunch" and "feeling" as anything else. A large
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