Why It's Time for Unaware Consumers to Get Clued in on Fiscal Cliff

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As the U.S. hurtles towards the fiscal cliff and possible recession in 2013, American consumers appear to be unfazed.

So far, most of the concern surrounding the looming threat-billions of dollars of tax increases and federal spending cuts set to take effect at the end of the year-has focused on businesses.

But while pundits in Washington and Wall Street rail against the impending calamity, most consumers just aren't paying attention, Tom Porcelli, Royal Bank of Canada's chief U.S. economist told The Wall Street Journal.

In fact, they seem to be blissfully unaware.

"Not until it makes it into the Rockland Journal News will my parents really understand about the fiscal cliff," Porcelli said. "Even if someone can acknowledge some familiarity with the topic, they probably don't know the details."

And that could mean troubled household finances in 2013 - especially with what this recent spending data has shown us.

Pre-Fiscal Cliff Spending Spree

In a sign that many consumers aren't worried about saving, Americans have been stepping up their purchases lately.

Americans spent more money at retailers in September - a buying surge that reflected growing consumer confidence and the launch of Apple Inc.'s (Nasdaq: AAPL) iPhone 5.
Retail sales jumped 1.1% last month, marking the best two months of sales in two years, according to figures released by the Commerce Department.

Even better, the buying binge was wide-spread as retailers saw gains in almost every major category.

Sales of electronics and appliances vaulted higher by 4.5%, in part because of iPhone 5 sales. Building materials, home furnishings, garden supplies and clothing sales all posted gains.

What's more, the University of Michigan's monthly survey of consumer confidence jumped to 83.1 in October. That's up from 78.3 in September - the highest level since September 2007 - three months before the start of the Great Recession.

Americans are also spending more on big-ticket items.

U.S. auto companies reported that sales rose 13% in September from a year earlier to nearly 1.2 million. Analysts think sales could hit 14.3 million this year, up from 12.8 million last year.

The housing market is also roaring back, boosting home prices and the "wealth effect"-making Americans feel better about spending more.

"The consumer is back," Joel Naroff, chief economist at Naroff Economic Advisors told CBS News."They are not spending money like it is going out of style...they are spending at a more normal pace that is consistent with a moderately growing economy."

But while consumers are ready to party, American companies are raising these warning flags.

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