Aug 4, 2008

Rising prices stifle impact of stimulus paymentsBy Martin CrutsingerBoston.com

Washington—Rising prices, falling home values, stagnant wages and tight credit. It’s a potent combination that has struck the American consumer hard.

In June, the second biggest rise in prices in nearly three decades muted the impact of billions of dollars in government stimulus payments, government figures showed Monday.

Incomes barely budged in June and consumer spending retreated after taking into account the higher prices for food, energy and other items, the Commerce Department data show.

It’s forcing Americans like Kathy Stanley, of rural Franklin County west of St. Louis, to decide every day what they can and cannot afford, even for staples.

Stanley said Monday that rising gasoline prices had eaten into her budget so drastically that she and her husband have eliminated almost all their discretionary spending.

She said she spent only about one-third what she normally does on her daughter’s back-to-school clothes and has even cut back on staple items as food prices have jumped this year.

“I had to cut back on milk,” she said. “We just drink more water.”

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