In your opinion, who’s right? Consumers, or Wall Street?
I think it’s the consumers. They (we) are the ones deciding how to spend. Rents and mortgages tend to be fairly fixed once they’re established. That is, you can probably cound on your rent rising once a year, your variable-rate mortgage rising with interest rates, and your fixed-rate mortgage rising with increasing property taxes (assuming one’s property value increases and the tax payments are rolled into the mortgage payment). I have the feeling that food prices are more-or-less stable. But gasoline is something that affects people frequently and sometimes dramatically. The email said that 31% of people responding to the poll cut down on food expenditures because of rising gasoline proces, and 63% felt the need to cut their discretionary spending because of rising fuel prices.
So people are spending less on keeping the economy running because they are spending more on fuel.
I really don’t have the time or energy for a debate, so this is just a poll.
Well that money has to come from somewhere to pay the higher gas bills, and energy bills. Now that can come out of spending, people can cut services - drop/reduce cable TV services, or decide not to go out to eat as often, or go to cheaper places, or reduce savings. So it has to have some effect.
No, consumers deal with increased spending the same way the government does; they increase their debt load. It is a magical moneypot that takes up the slack when you don’t have the discipline to live within your means. Deficits don’t matter, remember?
Well, if the prices stay this way for a while, I estimate that I’ll be spending $1,000 more this year then last. When I think about all the frivolous things people spend money on, it can easily top $1,000. Things like having to own the latest DVD or CD (think about your massive 1000 collection, that’s a ton of $$$, and is in no way an asset) , eating out (not really bad, but places like Apple Bee’s where it’s a minimum $10 plate? Not needed.), computer games, drugs and alcohol (including tobacco)… It adds up. So there’s plenty of room to “cut the fat” for a lot of people complaining about the increase in fuel prices.
Of course my $1,000 increase isn’t the same for everybody and could be more or less for you.
We belong to Sam’s Club. It’s a good way to save some money on purchases. That was fine when it was a five-minute drive to the store. But they’ve moved to a new facility on the opposite end of town from where we are. Gas costs so much now that any savings we might make on goods at Sam’s are offset by how much it costs to get there and back in the car. So we don’t go there anymore.
It seems to me that the discrepancy may be attributed to macro- vs. micro-economics. Those on Wall Street are seeing the “big picture”, where an increase in gas prices doesn’t really affect the total spending, but simply relocates it. For the individual, there is also a “relocation” (assuming they can afford luxuries, which is most assuredly not the case for everyone), but it has a greater impact on their choices.
Since macro- is defined by and reducible to micro-, I’d say the consumer is right. But it will take some rather large changes at the micro-level to cause a noticable change at the macro-level.