By Maxine Shapiro, KERA 90.1 commentator
Dallas, TX – Last week the market performance was the worst we've seen since right after September 11th. Yet most economic indicators are showing strength in the economy. Let's see if we can figure this out. I'm Maxine Shapiro with KERA Marketplace Middays.
Last Friday, the government reported, the first quarter gross domestic product, GDP, grew at 5.8%. That's the fastest growth we've seen in two years. Now the GDP is the broadest and most watched barometer of the nation's economic health. If there was any doubt that the recession was over, Friday's figures confirmed that it was. Then why did the market break? We'll get to that in a second.
Today the Commerce Department reported that both personal income and personal consumption expenditures rose four-tenths of a percent in March, another positive sign that was in line with expectations. Consumer spending, which fuels two-thirds of the economy, is the main reason for the recession being one of the mildest and shortest in history.
So while consumers have done their part, the business world hasn't. Still keeping a tight rein on their pocket book, Friday's figures also showed that corporate spending remains low, which is why the market broke. Just how many PC's can a household buy? Since December and up until a few weeks ago the economists' and analysts' euphoric speech has been drowning out the reserved and almost pessimistic voices of the CEO's. For some reason, and it's debatable why, corporations all over the country are sitting on cash they're reluctant to spend. And as unemployment continues to creep up, it's clear that no one is running to hire back the over a million people that got laid off last year.
Alan Greenspan's worries are legitimate. Because the consumer continued spending throughout the recession, there's no real pent-up need to spend down the stretch. In fact, based on today's stats, we the consumer actually saved at the same pace we did last September. The time has come for Corporate America to step up. For KERA Marketplace Middays, I'm Maxine Shapiro.
Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 P.M.