Consumer Spending: Key to Economic Recovery?

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Economists say the mixed economic readings of the past several months are not surprising. They say not all parts of the U.S. economy will recover at the same speed.

More clues about the health of the economy are expected Tuesday after Wall Street took a dive Monday.  Now major retailers like Home Depot and Target will release earnings reports, and home construction numbers are expected to be released as well.
    
However, many investors are still worried that consumers who have the money are not spending it.

That is one reason why the Dow Jones Industrial Average dropped by two percent on Monday.  The market is responding to retailers like Lowe's, which just reported earnings as being down by 19 percent.
    
Even back-to-school shopping has dropped by five percent.

"We're still running at confidence levels that are consistent with the worst of the recessions of the 1980's," said Diane Swonk, chief economist of Mesirow Financial.
    
Many economists have said we are technically out of the recession. They are encouraged by rising confidence among homebuilders and a market that has rallied for months, despite Monday's loss.

"We think that the S&P 500 could drop from its closing high of 1,012 just the last week, down to about 945-950 or so, before advancing once again and possibly hitting a recovery high," said Sam Stovall, chief investment strategist for Standard & Poor's Equity Research.

The country cannot recover strongly unless consumers spend more freely.  Consumer spending accounts for more than two-thirds of U.S. economic activity.    

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