So when taxes go up, Consumer spending goes down?
Spending by U.S. consumers cooled in March after the strongest gain in five months, showing the biggest part of the economy lost momentum as the first quarter drew to a close.
Purchases advanced 0.2 percent, more than projected and reflecting a surge in outlays for utilities and other services that is unlikely to be repeated, after a 0.7 percent increase the prior month, Commerce Department figures showed. Another report showed more Americans than forecast signed contracts to purchase previously owned homes in March.
Higher payroll taxes that took effect in January may be starting to take a bigger toll on the American worker, chipping away at the consumer spending that accounts for about 70 percent of the economy. With growth projected to ease this quarter and inflation subdued, Federal Reserve policy makers meeting this week will probably keep pursuing the record monetary stimulus that’s helped breathe life into the housing recovery.
“Consumers won’t be able to sustain the current pace if income growth continues to disappoint,” said Millan Mulraine, an economist for TD Securities USA LLC in New York, who accurately projected the gain in spending. “The weak inflation backdrop is likely to cause the Fed to at least keep purchasing” securities.
I wonder what would happen to Consumer spending if taxes went down.
