Consumers drive the American economy.
However, as of late, they feel less like drivers and more like passengers on a runaway train.
As the train barrels dangerously down the tracks, here are the five questions U.S. consumers should consider.
Will Prices Continue to Rise? Core producer inflation saw its largest gain in six months. Tobacco and light truck costs increased the most, but food prices (with potatoes leading the way) also increased. Gas prices dropped. But for how long? If gas prices join food’s inflationary trend, consumers will have less discretionary income. With 70 percent of our GDP dependent on consumer spending, our economy will continue to sputter along (at best). Combine rising inflation with the housing depression, high unemployment and uncertain equity markets and consumers may not be ready to spend for some time.
What is the Trump Phenomenon? We already know about The Apprentice and tall buildings. But “The Donald” recently unveiled a new phenomenon. On CNBC, commenting on his first ever purchase of stock,Donald Trump said, "I went out yesterday and said, 'Look, I'm not getting interest on CDs'...so I went out and bought some stock." And, with that, the Trump Phenomenon was born. Based in large part on the stalled economy, the Fed announced that it will keep rates “exceptionally low” through the middle of 2013. With interest rates at zero, ordinary, hardworking Americans, baby boomers and retirees cannot earn a fixed return on their savings, so they, like “The Donald,” are being lured into the stock market. Instead of baby boomers and retirees investing their money in risk-averse investments with a fixed yield, they will be subject to the (increasing) uncertainty and volatility of the markets.