The Business Times

Week to shed light on whether consumers can sustain spending

There have been some promising signs for the bulls

Published Sun, Jul 13, 2014 · 10:00 PM
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LAST week, US stocks fell slightly as the Federal Reserve confirmed that it was close to ending monetary stimulus and new worries surfaced in the form of an ailing Portugese bank and a Chinese trade slowdown.

While the rate of Chinese export growth and the failure of Banco Espirito Santo to pay some of its debts may be peripheral issues, data this week will answer a more central question facing the bull market. The question is: How long can the US consumer keep spending if prices are rising faster than wages? Something has to give, economists say. Either the prices of petrol and food must stop rising, or the average wages of Americans must start rising. Otherwise, consumers will spend less, and US companies will make less.

This week, a wholesale inflation index, congressional testimony from Fed chairwoman Janet Yellen and second-quarter earnings reports from a broad range of companies could help solve this important market riddle.

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