Consumer Spending: Main Street’s Take

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Prior to the recession and a dismal job market, spending beyond one’s means on homes, cars, consumer goods and other items wasn’t uncommon. But many big spenders have now been set straight, simply for fear of bad credit, foreclosure or even bankruptcy.

According to the latest figures, however, consumer spending is up, if only slightly. But is that good or bad news for Main Street?

Here are the facts: Consumer spending rose by 0.6% in the month of March, helping to fill big-company coffers a bit more than before. But Wall Street was disappointed and had hoped for higher numbers, even though consumer spending exceeded the 0.3% gain in personal income.

That makes us on Main Street a bit nervous. According to these figures, the increase in our rate of spending was double the increase in our income, which means that we could be spending more than we’re making.

Wall Street likes to talk about how we’re all responsible for the financial meltdown, and even though we all know that this fiasco was almost entirely Wall Street’s doing, Main Street should definitely take responsibility for its mistakes. And what was our mistake? Spending beyond our means.

The American middle class took out risky mortgages it couldn’t afford, all while living on credit cards with exorbitant interest rates. As a result, foreclosures and bankruptcies are sky high.

All of this leads us to a chicken-or-egg kind of dilemma. Consumer spending fuels economic growth, economic growth boosts jobs and wage increases and those increases lead back to more spending.

How do we get ourselves out of this toxic circle? Visit our page of debt management resources or our page on budgeting and saving to stay frugal and avoid the trap of overspending.

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