What to Expect at Stock Market Top—a Drop in Consumer Spending
(Updated 05/01/2018) Major automakers on Tuesday posted lower new vehicle sales in April as consumer demand continued to weaken following a lengthy boom for the industry. [7] Consumer spending accounts for about 70% of gross-domestic-product growth. When real income increases, the consumer spend more. When interest rates increase, the consumer spend less—because it costs the consumer more to borrow, so they step back from buying. If consumer spending in the U.S. economy starts to struggle, it will start to show up in the corporate earnings of companies on key stock indices that are currently able to buy back their own shares and cut expenses to make their numbers appear better. At the market top , we need to monitor consumer spending closely . When consumers are cutting back on discretionary purchases to preserve other spending, a market top could be forming and a recession could be imminent. Personal Savings Today, personal saving in th...
