Just a little over two years ago, president Obama made the announcement that we are in the recovery stage of the economy. The unemployment rate in June 2009, was 9.5%. Two years later, we are still at 9.2% with no end in sight. As this goes on, many American families are struggling to make ends meet. Well, just like our present federal government, they are turning to their credit cards.
According to First Data Corp.’s (the largest credit card processor) SpendTrend report, which was released this month, shows an ever increasing amount of credit card uses by consumers paying for basic necessities since salary increases are not keeping up with raising food and gasoline prices. Senior vice president at First Data, Silvio Tavares expressed that it may represent the increasing cost of fuel.
Tavares is quoted “Consumers, particularly in the lower-income end, are being forced to use their credit cards for everyday spending like gas and food.” He continued, “That’s because there’s been no other positive catalyst, like an increase in wages, to offset higher prices. It’s a cash-flow problem.”
The cost of food and gasoline are rising and leaving American less money to spend on discretionary items. Tavares said, Household spending accounts for about 70 percent of the world’s largest economy.
While he commented about this is slowing the pace of the economy, I say that we aren’t in the recovery stage yet. How can you slow something down that doesn’t exist?
In the report it shows the increase across the board in regards to credit card usage. Gasoline purchases, up 39% year-over-year ending June 2011 and food shopping increase 5%.
Figures from the Commerce Department show an After-tax income adjusted for inflation fell 0.1%. According the the Labor Department, energy prices climbed 8.2% and food 2% during the same time. That is a major swing in difference for low to middle income families.
We are not out of the woods yet, so for those of you that are feeling the pinch already, work on your budget since I feel that Congress won’t work on their budget, we will continue to struggle a little more. Those who think this increase usage is a sign of consumer confidence coming back, you might want to think again.