Rapidly Rising Food Prices Continue to Hurt Consumers and Stall Economic Growth

In the article “World Food Prices Rise at Alarming Rate; Up 10% in July,” Lombardi note that corporations can pass their higher costs onto their customers, but in return, if consumers don’t buy as much because of higher prices, the corporate earnings will decrease.

The more money consumers spend on food, the less they’ll have left to spend on other goods, reasons Lombardi.

“…consumer spending in [the] U.S. accounts for 70% of the gross domestic product (GDP),” says Lombardi. “Thus any change in consumer spending can have a ripple effect on the economy and corporate earnings.”

U.S. consumer spending rose 0.4% in July compared to June, but Lombardi highlights the fact that while a 0.4% increase in consumer spending may sound good, by no means is it impressive. He points out that this increase is overshadowed by the fact that there was no change in consumer spending in June and there was a decline in May.

From all the evidence provided, Lombardi concludes that there are clear signs consumer spending is at the point of breaking down further due to higher food prices—which is not a good sign for economic growth.

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Michael Lombardi, MBA, the lead Profit Confidential editorial contributor, has just released his most recent update of Critical Warning Number Six, a breakthrough video with Lombardi’s current predictions for the U.S. economy, stock market, U.S. dollar, euro, interest rates and inflation. To see the video, visit http://www.profitconfidential.com/critical-warning-number-six.