On Wednesday, the Washington Post declared that the housing bust was finally taking a bite out of the blithely free-spending American consumer. In "An ATM That's Out of Money: As Housing Market Slips, Tide of Spending and Refinancing Retreats," Nell Henderson reported:
For years, as the bull market in housing gathered steam, people used their homes as glorified ATMs, pulling out money for all sorts of reasons. The trend helped support continued economic growth and recovery from the 2001 recession.
But now people are reining in their spending, raising concern that their collective decisions could nudge a sluggish U.S. economy into recession.
But even Henderson had to concede that so far, the slowdown in consumer spending hasn't been huge. Working with the government statistics that were available yesterday, Henderson noted that "Consumer spending did slow in the first quarter, but to a strong 3.8 percent annual rate of increase from a torrid 4.2 percent pace at the end of 2006."
Today, the Department of Commerce released revised estimates for economic growth in the first quarter. The headline news is that the already sluggish GDP growth figure of 1.3 percent was slashed in half, to a barely perceptible 0.6 percent. But the surprising news is that one of the main factors keeping the economy growing at all has been ... the good old American consumer! That 3.8 percent increase in consumer spending? It was revised up to 4.4 percent.
If 4.2 percent was "torrid" -- what's 4.4 percent? The home equity ATM machine may be out of cash, but so far, the American consumer is undaunted.