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March 26, 2013

'A Serious Warning That Consumers May Be Tightening Their Belts'

Dean Baker issues a warning:
Consumer Confidence Index (the one that matters) Declines: The Conference Board's index of consumer confidence fell in March. What is noteworthy for those following the economy is that the current conditions index dropped by 3.5 points to 57.9. This component is the one that actually tracks current consumption reasonably closely...
The recent drop in the current conditions index ... should be taken as a serious warning that consumers may be tightening their belts. That would not be a surprising response to the ending of the payroll tax cut, plus some amount of layoffs and cutbacks associated with the sequester.
This is just one report among many, but it does suggest that the recovery optimists singing about having finally turned the corner may be wrong.
[For evdence pointing in the other direction, see Tim Duy's The Recovery is Real.]

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