Business practices leave consumer confidence low

The central bank of the United States is not sure about a strong economic recovery from the recent recession. The judgment about the economic condition is largely due to a decline in current consumer confidence. Further, the central bank worries about the future labor market that can further deteriorate the consumer confidence that was already betrayed by the fraudulent and deceptive corporate practices. \nOn July 16, Alan Greenspan, chairman of the Federal Reserve Board, reported the semiannual monetary policy to Congress. The semiannual monetary policy is for the Federal Reserve, as the central bank of the U.S., to review and evaluate current economic conditions. \nGreenspan describes the recent recovery from the recession as "less vigorous than in the past." \n"The pace of forward momentum (concerning U.S. economy) remains uncertain," Greenspan said. Concerning consumer spending, "a surge in household spending early in this recovery is unlikely," he said.\nGreenspan blamed current scandalous accounting practices for discouraging trusts and integrity of the U.S. economy. He recognized several deceptive practices from corporate CEOs are "highly destructive to free-market capitalism and, more broadly, to the underpinnings of our society." \nSince around the period of the Enron accounting scandal, there has been extensive and increased coverage concerning corporate CEO's misconduct. \n"Everyone is focusing on Wall Street business scandals," said Willard Witte, an IU economics professor. \nThis misconduct includes inappropriate relationships between accountants and CEOs that deceive their investors in order to scrap their own interest. Investors heavily depended on manipulated financial accounting statements for estimating the performance of the corporation.\n"An infectious greed seemed to grip much of our business community," Greenspan said.\nCurrent negative media coverage resulting from the "infectious greed" in the business world will further deteriorate consumer confidence. Consequently, consumer spending is not likely to surge in the near future. In general, a rise in confidence is consistent with stronger consumer spending.\n"In the short term, consumer sentiment is very much influenced by media," Witte said.\nConsumer spending fuels U.S. economy and its role is especially important during the recovery period. \n"The economic recovery is being powered by consumers as the plunge in business investment has stabilized but hasn't turned stronger," according to www.briefing.com, a Web based economic analysts site. \nUncertainty or pessimism for the future U.S. economy is translated into lifeless business expansion.\n"Business sectors have been pessimistic about the economic outlook. Hence, they did not think that they would need to build new factories when they need to reduce current inventory with a pessimistic outlook," Witte said.\nDespite the fact that the manufacturing sectors are staggering during the recent recession, their productivity has been improving rapidly. \n"Indeed, despite the recent depressed level of investment expenditures, the productivity of the U.S. economy has continued to rise at a remarkably strong pace," Greenspan said.\nTherefore, the current manufacturing businesses in the U.S. are experiencing subdued expansion over improved productivity. This may cause serious problems in the labor market. Improving productivity can even replace workers for new machinery and technology, which will cause higher unemployment in the manufacturing industry. \n"In part, these increases in productivity reflect the very cautious attitudes of managers toward hiring," Greenspan said. \nDue to improvements in technology and intensifying competition, the manufacturing sector's productivity has increased dramatically even during the current recession. But, this means that the manufacturing industries do not need to hire extra workers in order to increase the outcome to accommodate the current mild economic recovery. Hence, many experts conclude that the future labor market is not likely to be promising. \nThese pessimistic predictions concerning employment can further contract consumers' spending. Consumer spending makes up about two-thirds of the U.S. economy. \n"(Consumer's confidence concerning) expectations (for the U.S economy marked) negative 2.6 points (that) tied to the continued decline in equities and weak labor market," according to www.briefing.com.