Somehow, in all the confusion, the endangered species known as the American "consumer" missed the economic recovery. The reason, as Bloomberg writes, is that consumers are increasingly "using credit cards to pay for basic necessities as income gains fail to keep pace with rising food and fuel prices." The data comes from credit card transaction processor First Data which reported that the dollar volume of charged purchases rose 10.7% in June (a 6.8% increase in the number of transactions). "The difference probably represents the increasing cost of gasoline, said Silvio Tavares, senior vice president at First Data, the largest credit card processor.
"Consumers, particularly in the lower-income end, are being forced to use their credit cards for everyday spending like gas and food,” said Tavares, who’s based in Atlanta. “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." Alas, it gets worse. As Bank of America's Joshua Dennerlein reports today, the end of the year will see 3.7 million Americans stop receiving jobless benefits.
"This will act as a hit to consumption in the first quarter of 2012." This number is completely independent of any possible new legislation to extended jobless benefits for new unemployed labor pool entrants, as it merely affects those about to hit the 99 week cliff. Unfortunately even more "growth" over the next 6-9 months will have to come from the Fed and the only thing it knows how to do: print, print, print.