Consumer spending blamed for GDP fall

12.26.08
By Nicholas Storie

In another sign that the dollar in your pocket is directly linked to the fortunes of the national economy, the recent downturn in consumer spending is being cited as the main reason for a decrease in a key economic indicator.

Gross domestic product - the output of goods and services produced within the United States - fell by 0.5 percent during the third quarter of 2008, according to official statistics from the Bureau of Economic Analysis. This compares with an increase of 2.8 percent during the second quarter of the year.

In total, consumer spending fell by 3.8 percent in the third quarter, a clear sign of the ailing economy.

And little appears to have improved in the closing months of the year - despite the boost traditionally given to retail sales by the holiday season commencing Black Friday, the day immediately after Thanksgiving.

According to the latest research conducted by Mastercard's SpendingPulse unit, spending between Black Friday and Christmas Day fell between 5.5 and 8 percent compared with the same period last year.

"Overall this has been one of the most challenging holiday seasons on record," spokesman Michael McNamara is reported as saying by Bloomberg.

As evidence of the increasing pressure on retailers mounts, consumers - already feeling the pinch of the recession - appear to be thinking twice about increasing their credit card debt at this difficult time.

Indeed, the sharp slowdown in the retail sector is worrying some organizations so much they are calling on the incoming Obama administration to take immediate action to encourage shoppers back into the stores.

Earlier this week, the National Retail Federation urged President-elect Obama to introduce three national holidays on sales tax during 2009 in an attempt to lure consumers into opening their pocketbooks with greater readiness.

More Personal Finance Articles | More Credit & Debt Articles | News Home | Discuss in our Forum

Shoppers are walking away with less as economic crunch bites