Increases in household wealth – largely reflecting gains in equity values – and lower debt burdens have also increased consumers’ willingness to spend. On the negative side, households are facing some significant headwinds, including increases in food and energy prices, declining home values, continued tightness in some credit markets, and still-high unemployment, all of which have taken a toll on consumer confidence.
Developments in the labor market will be of particular importance in setting the course for household spending. As you know, the jobs situation remains far from normal.