Mean ol' Dubya, --everyone knows that the world was so much better with Clinton's record prosperity. Wasn't that the reason that we couldn't impeach the rapist, because he made the economy soooo much better?
Posted on 06/19/2003 12:35:22 PM PDT by Brian S
Thu June 19, 2003 01:47 PM ET By Andrea Hopkins WASHINGTON (Reuters) - Maryland father-of-two Nat Bottigheimer has heard the hype about falling inflation, but he has no qualms about pushing ahead with an $80,000 kitchen upgrade.
"The only inflation I'm worried about now is the kids -- they're getting larger and the kitchen is staying the same size," Bottigheimer said, nodding at the daughter in his shopping cart at a giant home Expo Design Center north of Washington.
While the risk of falling prices -- the deflation demon that crippled Japan -- has caused concern at the Federal Reserve, Bottigheimer embodies the consumer culture that has held up the shaky U.S. economy since the 2001 recession.
The transportation analyst believes the economy will probably get "a little bit worse" before it gets better, but, like many Americans, he's not willing to defer spending to see if the distant drum of deflation fears heralds real danger.
"It might not happen. I just feel that what I have to do outweighs whatever might be ahead. And whatever happens, I don't think it will be so bad it will make our current spending plans unwise," Bottigheimer said with a shrug.
It is this sort of confidence that stands between the U.S. economy and deflation -- a general decline in prices not seen in the United States since the Great Depression.
The Fed has said the risk of deflation is only minor, and most economists agree. But with an underlying inflation rate running at 1.6 percent a year -- just above a 37-year low -- the fear is that consumers may begin to expect prices to fall and put off purchases in anticipation of future bargains.
That would spell disaster for the tepid recovery.
DEALS, DEALS, DEALS
While America is still struggling to gain some traction in the recovery from the 2001 recession, consumer spending -- which accounts for about two-thirds of the economy -- has so far held up well. Retail sales rose 5.1 percent in May from a year ago, despite dips in the period around the Iraq war.
At a Best Buy electronics store in Maryland, 29-year-old air conditioning repairman Chris said he hasn't heard about deflation and does not worry much about his spending.
Two months ago, he bought a $2,000 computer, and he said he keeps an eye out for "whatever is on sale."
"If there's a good buy, you can't pass it up," he said, adding another DVD to his stack of movie purchases.
But keeping shoppers in the stores is no easy feat, and retailers and manufacturers have battled to keep prices low.
Detroit's Big Three automakers have sweetened already generous incentives, offering rebates of up to $5,000 on new cars or zero-percent financing for up to five years in a bid to keep slowing auto sales from bottoming out.
Thomas Maad, sales manager at Dulles Motorcars in Virginia, said automakers bear the brunt of the drive to attract buyers, whose appetite for new cars slumped when the Iraq war loomed.
"As recently as last week, they've come up with additional incentives to help sales, to attract more buyers," Maad said.
The incentives have helped cut new car prices by 1.2 percent over the past year, making it one of three major sectors, including clothing and computers, to show steady price drops. Apparel costs are down 3.6 percent since last year, while computers cost 21.7 percent less.
But the lower car prices appear to be paying off.
"Things remained slow until April or so, and then they've picked up. It was our best May ever -- probably our second-best month ever, and we're doing fine this month," Maad said.
That kind of pricing pressure is what the Fed fears may push inflation too low. Why buy a car now if rebates will rise again next week, or be extended to new models?
Still, if suburban shoppers are any guide, there is little risk of deflation-deferred spending just yet, despite ever-increasing consumer debt. According to the Fed, household debt is growing at 10 percent a year -- a fierce emblem of America's borrow-and-spend culture.
"I believe the economy is going to get worse and at some point it's going to have an impact on me and I'll have to take notice," admitted program analyst and mother-of-two Lori Stalbaum, buying a lawnmower with a friend at a Home Depot.
"But I don't change my spending because I try to ignore how much debt I'm in," she said with a laugh.
Nearby, legal assistant Mary Ashworth agreed.
"It costs you to live. And with prices you win some, you lose some. I never wait to buy something I need," she said.
Hear hear!
Most, IMHO, are not "spending" at all...there just getting themselves further into debt, kind of like how the government done for the last 30-40 years.
Mean ol' Dubya, --everyone knows that the world was so much better with Clinton's record prosperity. Wasn't that the reason that we couldn't impeach the rapist, because he made the economy soooo much better?
(snicker)
Bundle consumer debt with gov deficit spending, and corporate debt, and you got yourself a pretty nice economic house of cards!
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