Stimulus Package Not Helping Consumers as Much as in 2001

The tax rebates may be helping the economy avoid, or minimize the impact of, a full-blown recession, but higher energy and food prices and tighter credit conditions mean that this stimulus package isn't helping out consumers as much as the 2001 version did.

The government reported yesterday that consumer spending rose a robust 0.6 percent in June, but when inflation is factored in, spending actually dipped 0.2 percent compared with May.

The following chart shows the year-over-year growth in inflation-adjusted spending:

This can't be welcome news for the Fed. On the one hand, inflation is obviously taking a big chunk out consumers' spending power and some Fed members are dying for tighter policy, but with a weak economy and financial markets still in need of help, the FOMC is just not in a good position to raise rates.