Alan Clayton-Matthews Explains Economic Slip and Predicts Uptick

U.S. consumer spending slips, income stagnates

By Jordan Graham | The Boston Herald | June 1, 2013

Spending in the U.S. dropped for the first time in a year and income stagnated according to the U.S Department of Commerce’s report yesterday on the April economy — released even as consumer confidence numbers hit a six-year high.

The report showed the first drop in spending since last May — a 0.2 percent slip that came after a strong first quarter, including a 
0.8 percent jump in spending in February.

“The economy is in a bit of a soft patch,” said Alan Clayton-Matthews, an economist at Northeastern University. “The spending cutbacks and sequestration are affecting household disposable incomes.”

Still, according to the Thompson Reuters/University of Michigan consumer sentiment index — which measures how people feel about the economy and their own finances — consumers are more confident than they have been since July 2007.

“The housing market combined with improving job market is a recipe for rising consumer confidence,” said Michael Goodman, an economist at UMass-Dartmouth. But, he added, that doesn’t necessarily translate to higher consumer spending.

Income was stagnant in April, according to the Department of Commerce, despite strong housing market numbers and improving job prospects. The federal government’s extensive cuts under sequestration may have caused hours to be cut, contributing to a standstill of wages and salary, Clayton-Matthews noted.

He expects the economy to pick up towards the end of 2013 thanks to “pent up demand,” for purchases that have been put off, he said. “All it’s waiting for is the economy to absorb these negative shocks.”

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