Direct Line Blog

Retail sales fall: Is recovery blunted?

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A report that retail sales contracted in April was met with doom and gloom in the stock market today, as investors worried that recovery from the economic recession is still some time away.

However, consumer confidence recently showed an increase. So which is it?

As unemployment climbs, it's unlikely that consumers are in much of a spending mood. They may see potential for recovery, which ups confidence, but are still struggling in the short term. Vice President Joe Biden noted that only 6% of the economic stimulus package has been spent — most of that in the form of the small "Making work pay" tax cut, Social Security payments, and state aid. The real, job-creating heart of the stimulus package has yet to go into effect — and it will take an increase in employment for consumers to begin spending as they did pre-recession once again.
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