We all know that consumer spending makes up about two-thirds of the nation's gross domestic product (the sum of all spending basically), and that's why it's so important to the economic and financial outlook.
Right now, the outlook isn't bad, but it isn't all that great.
Chain store sales fell by 0.3% in the week ended March 6 after being flat the previous week, according to the survey done by Mike Niemira at the International Council of Shopping Centers. That sounds pretty lackluster until you look at the year-over-year comparison, up 7.0%.
The main problem with the year-over-year comparison is that last year we were on the verge of the war in Iraq and consumers were paralyzed, waiting for the conflict to start, wondering how bad it would be, fearing how long it might last.
On a less dramatic note, warmer weather helped sales with the nation's average temperature about ten degrees higher than usual.
The big question is where are we heading if jobs aren't picking up?
And that's where things look cloudy. It's true that we are paying less taxes than last year because of the president's tax cuts., and some are getting bigger tax returns. Here, things are a bit disappointing because it turns out that the $300 average increase the Administration forecast is turning out to be more like just $100 -- not bad, we all like a bigger refund, but maybe not as big of a boost as hoped for.
On a more fundamental and lasting level, there's the question of how big are our paychecks and how fast are they growing relative to inflation? Not good.
In the February, according to the Labor Department's employment report, average hourly earnings (think wages and salaries) grew just 1.6% compared with a year ago. Yikes. The yearly inflation rate is around 2.5%, so that means families aren't even keeping up with a very meager rate of overall inflation (and compared to the basics like surging energy prices, a lot of people are really feeling the pinch). With gasoline prices at a buck-seventy-five a gallon, families with smaller incomes are going to be feeling a bigger bite.
Let's don't ignore the good news for consumer spending overall, because the consensus forecast is for spending to be at least as strong as last year -- up 2.7% -- or a bit better at around 3.5% or so.
Job insecurity and jobless recovery are in the air, but there are millions of Americans who are working and are still spending money.
Rising home prices are making even average everyday middle-income consumers feel wealthier and that produces some more spending. It's true that 90% of stock ownership is concentrated in the hands of 10% of the population, but even so the comeback in the stock market over the past 18 months is another reason to think spending will be at least as good as last year.
Even though the tax cuts in absolute terms provide a much bigger pay out to the nation's wealthiest, they also give lower income workers some relief. That can't hurt spending either.
One of the big risks to the spending outlook on the negative side is rising interest rates, because that could bring an end to all the discount financing that has been used to get consumers to buy cars, as well as push up mortgage rates which would crimp home sales and purchases of related items like furniture and stoves.
One of the biggest pluses for spending is the simple fact that the U.S. consumer is the Energizer bunny of the world, seemingly unstoppable even when times get tough, and ready to take advantage of a bargain even at a time when worries about the job market put a dent in their confidence.
Kathleen Hays anchors CNN Money Morning and The FlipSide, airing Monday to Friday on CNNfn. As part of CNN's Business News team, she also contributes to Lou Dobbs Tonight.