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Consumers puzzled with the real state of the US economy

By Brian Anderson
Published: Monday, July 5th, 2010

10With the economy in such turbulent waters nowadays, economists are having a hard time giving the right signal to US consumers. Giving out a thumbs-up will definitely increase the number of sales and transaction throughout the country. But, all the while, the consumers are more aware of how the economy has been faring lately. Despite not knowing the technicalities of the stock market, these people simply rely on their instincts to tell them whether it is a good time to spend or a good time to apply for credit.

For the past few months, just when people thought the economy already recuperated from all the losses it incurred last year, unemployment rate increased. Because the only jobs with opening are those which are contractual, a lot of people became afraid of spending. This trend in consumer spending became another burden to economy as retail industry experienced decline in sales and consequently in production. Since there was very little demand then most of the stores had fewer profit than the past months.

This will then have a trickle down effect to the people who are considering borrowing money from lending institutions. The state of the economy has a direct bearing on the applying for loans. It is common to see a longer queue of loan applicants—which is indirectly proportional to the number of loans available. Therefore, it will be harder to secure a loan and only those with excellent credit scores will be able to get it at good rates.

First is because is the economy is good then it will be easier for lending institutions to shell out money. But in a bad economy, they will be extra careful about giving the loan to a person capable of repaying within the terms agreed upon.

Another thing is that, in a good economy, usually the terms are better because most people are not afraid to lend to borrower. And every lending corporation must battle it out with other corporations offering loan assistance. So it is likely to see better interest rates during bullish markets.

But with how the market and the consumers are acting lately, it seems as if the figures will be the same for months. Unless the public has been advised that it is completely fine to spend just the same for necessary items to purchase, they will be scared of spending money and this will affect the retail market.

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