Reply #38: US consumer shows signs of flagging

[54anickel]

http://story.news.yahoo.com/news?tmpl=story&cid=1518&ncid=1518&e=8&u=/afp/20040824/bs_afp/us_economy_sales_040824181923

WASHINGTON (AFP) - Consumers, the heart of the American economy, are showing signs of flagging in a worrying development 10 weeks ahead of November 2 elections, analysts said.

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US consumer spending, accounting for two-thirds of economic activity, fell 0.7 percent in June, government figures showed, the steepest monthly plunge since the September 11, 2001 terrorist attacks.

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Many households were facing tighter finances, with weak employment growth, Anderson said. Indebtedness was at high levels because of the lure of low interest rates, and real disposable (after-tax) income growth was deteriorating, he said.

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"You had the consumer boosted by a lot of kind of gimmick stimuli over the last two years: multiple tax cuts, cash taken out of their mortgages, zero percent loans for autos and other durables, and all of those gimmicks have given us a nice solid rate of consumption in the face of a droopy economic recovery," said Lehman Brothers' Harris.

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