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Tuesday, May 31, 2016

Consumer Spending Increases 1% Showing Cosumer Confidence

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 increase of 1% in a single economy means that people are feeling good and have positive perceptions of their lives. They want to enjoy the things they purchase and not worry about tomorrow. As their optimism rises so does the general speed and strength of the national economy. How people feel when they go into a store is the first point of contact that determines consumer activity on a national level.

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