With major chain stores reporting solid sales this week, we can't help wondering if the economy is experiencing one of those Wile E. Coyote moments. Over the past several months, the ground under consumers has been crumbling relentlessly, yet spending has remained mysteriously aloft. But like the fate of the beleaguered Looney Tunes road runner, it may be only a matter of time before gravity takes over, producing the inevitable plunge that ends with a severe hangover for households. It's not that consumers have been running on a completely empty tank to sustain spending. It's just that they are relying heavily on high-octane tax rebates and the drawing down of credit lines, which will soon run dry and leave the fuel gauge at the near-empty mark.

Still, that day of reckoning continues to be pushed back, leaving the economy on a respectable growth track for the time being. This week's sturdy sales reports by the major chains for June -- which should be confirmed by the broader retail sales report next week - just about assures a solid increase in consumer spending for the second quarter. With household spending accounting for about 70 percent of total economic activity, that also means GDP will likely post another positive growth rate in the second quarter, raising further questions about whether the economy is recession-bound, as most economists still believe. But in the absence of another immediate dose of fiscal stimulus, the staying power of the economy's main growth driver is highly suspect... Read More >>>