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Conspicuous Consumption

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Consumer spending on the rise - at least for now.

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It looks like Armageddon can be postponed for at least one more month.

The National Association of Purchasing Management-Chicago, a nonprofit that seeks to strengthen procurement through education, research and communication in the Chicago area, reports that business activity edged up in June, easing fear that a slump in manufacturing was deepening.

The Association's business index rose from 49.1 in May to 49.6 in June. Fifty is the dividing line between growth and a slump, so this isn't rousing news. However, it suggests that the slump that began in February is at least slowing.

The index stood at 51.5 in January, 44.5 in February, 48.2 in March and 48.3 in April. Last year, the index averaged 54.4.

Consumers are spending their tax rebates, giving at least a temporary boost to the economy.

Consumer spending increased 0.8% in May - the biggest increase since November, the U.S. Commerce Department reported last week.

Income grew 1.9% -- the largest increase since September 2005 -- and inflation was lower than expected.

The big unknown is fuel prices. Will rising gasoline prices at the pump crimp future retail sales?

If nothing else, the Association's report means that manufacturing activity hasn't fallen off a cliff. If purchasing is the leading indicator, it may mean that the economy has bottomed out and could be picking up a little.

Keep an eye on companies such as Dell (DELL), and Hewlett-Packard (HPQ) to gauge business spending and Wal-Mart (WMT), Target (TGT) and Macy's (M) to see if consumer spending holds up.
No positions in stocks mentioned.
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