Leo: Project Economy News now, consumer spending reports came back this week and they reflect some interesting data.
Nancy: Yeah, consumers are feeling the pinch of higher gas prices, and higher food prices. Kurt Pearson with Compass Financial joins us now. Kurt, thanks for being here. You’re saying that people are kind of putting off buying those more non-essential items now so what does that mean for the economy?
Kurt: Yeah, the very astute consumers obviously taking a look at their cash flow numbers and saying, “Hey, because prices are up in some areas of my normal spending I can’t go out and do some of those discretionary items that I would really like.” Some of our toys, some of our household appliances perhaps, that we can delay the purchase for a while.
Another piece to this that isn’t being reported, in this report at least, is that our wages are pretty much stagnant. They’re going up just a little bit but they aren’t really keeping pace with how some of our basic household costs are increasing. And so it’s putting a pinch right there on the consumer.
Leo: Okay, so as a result of that are we’re seeing debt acceleration at all?
Kurt: Something we’re really watching, we have seen credit card debt come back up from the post-recession lows. We’re at about $870 billion. Total debt is at 3.1 trillion. Most of that is student loans which is very interesting shift, we hadn’t seen this before.
Usually, consumers will begin to load up more on the credit cards as they feel better about the economy. This time that’s growing at a slower pace in some other areas so it doesn’t have that immediate kick to the economy that we’ve seen in other post-recession recoveries. So it’s going to be real interesting to see how this plays out. Consumers are still saving about 4 percent of their income, give or take, so that’s a good number that’s rebounded but the spending thing is very important to the economy so we’ll have to watch future reports and see how it goes.
Nancy: And it’s interesting because the stock market keeps seeing – hitting new highs so it seems that things are going well.
Kurt: Very interesting, this next quarter we’re really watching for some of that disconnect that can begin happening when a trend change is imminent. Meaning, that if we get good economic news but the stock market doesn’t go up, it goes down instead, or vice versa, those are signs that you’re beginning to get close to a trend change, so something for folks to watch over the next quarter.
Leo: Ok, Kurt Pearson, thank you very much. Kurt is with Compass Financial. If you have any questions for him you can contact Compass at 515- 327-1020.