Burdened Consumers Driving the Economy: This Can't Last

This is a relatively important week; after all we get inflation data this week. We also have some important productivity numbers.

This is the theme I expect when the dust settles:

The Pricing power on the producer level is much stronger than that on the consumer/retail side. The margins on the producer side are also being squeezed by higher energy and raw materials costs from what I see. That tells me that Producers will try their best to recoup these lost margins, and barring higher net sales to offset the aforementioned, they will do everything n their power to raise prices.

Higher prices on the producer level usually roll over to the Consumer. However, in this instance I do not expect that. Consumers are not spending money like they used to, and the retailers have no pricing power in my opinion. Yeah, food and energy...but consumer discretionary items have no pricing power.

This puts a major squeeze on the middle man.

Productivity should be strong, and aside from the consumer, the other sectors of our economy should appear strong too.

We all know that the consumer drives the economy though, he always has. The question we will be faced with at the end of this week is how long will the rest of the economy hold up in the face of a consumer burdened by higher mortgage costs, inflated credit card debt, questions about the economy, deteriorating confidence, trouble getting credit, a much lower perceived net worth, and one faced with the troubles of a declining stock market?

The answer...it wont take long...