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Continued: Wealth effect falls flat: Rising stock, house prices aren't sending shoppers to the mall

  • Article by: PAUL WISEMAN , AP Economics Writer
  • Last update: June 21, 2013 - 5:40 PM

For all these reasons, the wealth effect "has grown more muted," Zandi says. In the past, a $1 increase in net worth overall could boost consumer spending by about 5 cents. These days, Zandi calculates, $1 in increased wealth generates just 2 cents to 2.5 cents in spending.

And generating wealth may be even harder if the Fed goes ahead with plans to scale back and eventually end its bond purchases. The stock market has taken a beating since the Fed revealed the news Wednesday: The Dow dropped 206 points Wednesday and 353 points Thursday before bouncing back 41 points to close at 14,799 Friday.

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