Tuesday, August 03, 2004

 

Lower incomes create lower spending.


Some end of the month financial figures came out today. July's unemployment report is due on Friday. On the heels of Friday's report that income for employed workers is down comes a report that spending is down as well. Big surprise. If you're making less money, it follows that you would be spending less money, particularly since rates for houses and cars is going up.

The low rates of last year, during which many home owners refinanced their houses to take advantage of lower rates and higher home values, are rapidly drying up. Although financial news of the past 7 - 10 days has pushed rates down a bit, financial experts are expecting good employment news on Friday, which will pressure the bond market and move rates up. A CNN
article quotes

Anthony Crescenzi, bond strategist with Miller Tabak & Co. "But spending on services, which is where the majority of the job creation occurs, has held on, and we expect it to pick up. Friday's payroll report should be a good indication of that."

Towards the end of the day, a higher than expected auto sales report tempered the bond market's reaction to the days previous bad news. An extra million more autos than expected were purchased in July. Hopefully people were trading in SUVs for more economical transportation since oil prices hit record highs today, topping $44 per barrel.

This summary brought to you by DeVry University and Keller Graduate School of Management.

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