Consumer Squeeze Play

By Andrew Paparozzi
In March 4, 2008

Is the consumer being squeezed? This sector’s resilience has been one of the hallmarks of the economy over the past few years. Data from the Bureau of Economic Analysis on personal income and consumption provide the sharpest evidence to date that the consumer sector may be on a precarious footing.

Disposable personal income (income after taxes) in January 2008 was 5.0% above it s level of a year ago. However, when adjusted for inflation, the gain was eroded to a mere 1.2%. This is down substantially from the 3.0% increase recorded during the previous 12 months. On a similar basis, consumer spending was up just 1.8% in January—roughly half the year-over-year increase in January 2007. The main culprit—other than housing and the credit crunch—is inflation. Surging food prices have teamed up with higher energy prices to put a significant hit on the consumer’s wallet.

Unfortunately, there are no easy fixes. Both energy and food prices are reflecting forces that may not subside with the economic slowdown—such as geo-political uncertainty, the fall in the U.S. dollar, and the push toward greater use of bio-fuels. Note that these data do not necessarily confirm the existence or the inevitability of a recession. But also note that even if we don’t have an outright recession, the economy will exert a significant adverse impact on the printing industry in 2008. As Bette Davis would say, “Fasten your seatbelts, it’s going to be a bumpy ride.”

Joseph Vincenzino

Andrew Paparozzi

Epicomm's Andrew Paparozzi, Vice President/Chief Economist, is well-known for his accurate and thoughtful discussions on the economy and US commercial printing industry. A foremost author and speaker on economic business trends in the printing industry, Paparozzi heads Epicomm's Printing Economic Research Center.

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