April 27, 2001
Consumer Woes Will Wipe Out GDP Growth
Consumer spending may have buoyed the GDP in the first quarter, but rising gas prices and frequent layoff announcements have added to pessimism regarding the current economic outlook. Until now, consumers have carried this economy, but they can't keep it up much longer.
Jobless claims are at a five-year high and rising, and household savings have been negative for months. Household debt that has hit an all-time record -- 117% of disposable income. Americans aren't saving for a rainy day -- they're living paycheck to paycheck and aren't prepared for unemployment. Thousands of job cuts have been announced in just the past week. And with businesses still struggling with earnings, it is likely that thousands more jobs will be lost next week and in the months ahead.
Wall Street's lowered expectations for company earnings may protect some stocks from severe punishment, but it doesn't change the fact that companies are still struggling to post a profit. If they're not able to show investors a marked improvement and promises of a quick turnaround, stocks are still going to suffer.
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