Consumers Squeezed, Spending Stalls

As prices rise, wages fall and unemployment jumps, spending growth has stalled
By Clay Dillow,  Newser Staff
Posted Oct 3, 2008 10:45 AM CDT
As the subprime meltdown continues to roil markets and the consumer price index climbs, consumers are fearful of parting with their cash.   (AP Photo/Rich Pedroncelli, file)
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(Newser) – The current economic crisis is shaping up to be different than others Americans have weathered in the past 20 years in an important respect, the Washington Post reports: consumer spending, which the nation could always count on to propel the economy through, has stalled. Real spending, the catalyst behind 70% of GDP, has been flat or down since June, and economists predict the third quarter will show the first decline in spending since 1990-1991.

The consumer price index increased 4.3% in the second quarter compared to last year, at the same time falling wages, spiking unemployment, and dwindling credit were tightening purses. Even in the months after the 9/11 attacks and Hurricane Katrina spending grew 1-2%, but some economists predict a decline of 1-2% in coming quarters.