Recovery a clunker: Cash for Clunkers program gave economy small boost, but spending was flat Read more: http://www.nydailynews.com/money/2009/08/29/


Worries over high unemployment pushed consumer confidence to a four-month low in August, while spending modestly improved in July - indicating the economy's recovery from the lengthy recession would be modest at best.

The now-ended Cash for Clunkers program helped lift consumer spending 0.2% last month and is expected to deliver a bigger boost in August. Without that program, consumer spending was flat.

Any economic rebound likely would falter if shoppers lack the income to spend more in the long run.

The government said sales of autos and parts jumped 6.4% in July, but sales of nondurable items such as clothing and shoes fell.

Ford said Friday it expects overall auto sales to show a gain in August for the first time in more that two years. Also, GM said it expects the industry's sales to rise to 12.1 million next year. But analysts say the rest of this year could show declines since the buying incentives have ended.

Also, household income remains essentially stagnant, raising doubts about whether consumers already hurt by job losses and dwindling retirement accounts can sustain an economic recovery. They are essential to any recovery since consumer spending accounts for about 70% of the nation's economic activity.

Retailers already are paying the price for flat income growth and weak consumer spending.

A survey of big retail chains showed that shoppers remained tightfisted in July. That raised fears not just about back-to-school sales but also about the make-or-break holiday shopping season.

"Consumers just don't have the financial firepower to go out and spend more," said Mark Zandi, chief economist at Moody's Economy.com. "Unless businesses curtail their job cuts, the recovery could very well peter out."

Read more: http://www.nydailynews.com/money/2009/08/29/2009-08-29_recovery_a_clunker_.html#ixzz0JoHE0rX1

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