3 On Your Side: Consumer Uncertainty Hurting Economy
PHILADELPHIA (CBS) -- As investors are still trying to make heads or tails of the roller coaster ride on Wall Street, word comes that Americans borrowed more money in June than during any month in the last four years. As 3 On Your Side Consumer Reporter Jim Donovan explains, that can be interpreted in a number of ways.
Borrowing is usually a sign of confidence in the economy as consumers tend to take on more debt when they feel wealthier. But an increase in credit card debt can also signal that people are falling on hard times. What is going to happen next? That is one question in the minds of many investors after yesterday's stock market plunge.
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Economist Joel Naroff believes it was merely a market correction and that corrections should be expected from time to time. He says, "Markets tend to overshoot, they tend to correct and they tend to move forward. Under these set of circumstances I think we've had a correction, we may go down some more, but that doesn't mean we're going to be plummeting,
Naroff says consumers are uncertain about the future and that doesn't bode well for the economy. He says, "They are losing money because of the higher cost of gasoline, job growth is minimal, most businesses are not raising wages and prices are rising. So really the average consumer is under stress and as a result of that they've turned really cautious and this is an economy that simply needs the consumer to spend money and that's not happening. Until consumers decide they want to spend, where going have issues." One woman that 3-On Your Side spoke with jokingly said, "You've got to ride it out, you can't panic. That is what medication is for!"
Remember, the recession technically ended two years ago. Naroff says that while anything is possible, it doesn't look likely that we're going into a double dip recession, but it also doesn't look likely that we're in for any period of very strong economic growth.
Reported by Jim Donovan, CBS 3
