U.S. News: Retail Sales Fall Amid Consumer Unease; Spending Folds As Fiscal Stimulus Plays Its Last Card
Sales at retailers nationwide slumped during last month's back-to- school shopping season, a sign that consumer spending, the main driver of U.S. economic growth, is weak.</br></br>"Without the props from the fiscal-stimulus rebates, consumer spending is slowly caving in," said Brian Bethune, chief U.S. financial economist at Global Insight in Lexington, Mass.</br></br>The government's economic-stimulus plan doled out some $107 billion to low- and middle-income Americans earlier this summer in an effort to boost spending. But the gains were fleeting and smaller than hoped. As a result, economists are largely opposed to calls for a second round of stimulus checks, a plan backed by Democratic presidential candidate Sen. Barack Obama. Republican rival Sen. John McCain has said he is open to a stimulus plan but hasn't committed to any specific proposal.</br></br>Meanwhile, unemployment continues to rise and consumer spending is poised to decline this quarter for the first time since the 1990-91 recession. The decline would be a setback because consumer spending has proved resilient, even increasing during the 2001 recession when many thought it would drop.</br></br>But a combination of falling home prices and stock-market wealth, rising unemployment, stagnant wages and heavy credit-card debt has left consumers in a difficult position. Global Insight expects consumer spending will drop about 1.1% this quarter, and many economists caution that spending could be weak through 2009.