Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here Monday mornings.
I’m an optimist by nature, but I can’t help but wonder how consumers will hold up in the face of so many glaring issues around the world. Just last week the 25 mega-retailers tracked by Thomson Reuters reported a larger than expected jump in sales for the month of March. And companies like Macy’s and Limited Brands (which owns Victoria’s Secret) are predicting even stronger months ahead.
This consumer strength is interesting, and I wonder at what point that could change in the face of what I call the “Dirty Dozen.” Here are the 12 obstacles we face today.
1. Civil war and riots all over the Middle East and North Africa
2. Escalating oil and gas prices
3. Inflation beginning to erode the value of the dollars in your wallet.
4. Interest rates – both the current lows (check your money market or savings account rates), and worries that rising rates will drive up the cost of financing everything.
5. Housing. Could the numbers be any worse? (see my blog on housing from last week)
6. China – the world’s growing dependence on its economy
7. Japan – earthquakes, tsunamis, radiation and more earthquakes – all of which are hobbling the world’s third largest economy and interrupting the supply chain for U.S. manufacturers
8. Europe’s continued debt problem
9. Ballooning U.S. government debt, which expands by billions of dollars a day
10. Unemployment rates that are still near record highs
11. A “bond bubble”
12. A potentially overheated U.S. stock market poised for a fall
To date, the U.S. stock market has shaken off most of these scary headlines. Despite a brief hiccup in March, the Dow Jones is nearly 7 percent higher in 2011. And it’s not just the stock market that seems confident. Consumers, the main driver of the U.S. economy, are apparently upbeat about things, as evidenced by their willingness to open the spending spigot.
Here’s the “but” — and it’s a big one: This report could be yesterday’s news. The data was gathered just as most of these troubling developments were unfolding, possibly too early for consumers to react with their wallets. Now, we sit in mid-April with oil not hovering around $100 a barrel but at more than $110. That’s getting closer and closer to an economic red light, according to my chart:
When will the economic light turn red? The answer: whenever you and I start tightening our purse strings.
Have you cut back on your spending? Do you feel you will have to cut back soon? What impact are the climbing gas prices having on your spending decisions?
– By Wes Moss, for Atlanta Bargain Hunter