Comments on: Guest post: What personal consumption data means for the stock market http://www.nakedcapitalism.com/2009/06/guest-post-what-personal-consumption.html Sun, 22 Nov 2009 02:09:47 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Brick http://www.nakedcapitalism.com/2009/06/guest-post-what-personal-consumption.html#comment-48294 Brick Wed, 03 Jun 2009 10:14:12 +0000 http://www.nakedcapitalism.com/2009/06/guest-post-what-personal-consumption-data-means-for-the-stock-market/#comment-48294 Despite having some reservations about the data, the report shows that consumer spending was down again despite a 1.1 percent rise in disposable income. Next months figures will not include social benefit rises, personal income allowance changes and yearly pay review changes, so we might expect the report to be worse next month. With government demand down with the exception of defense the real economy can be seen to be treading water at the best.<br /> The question then becomes will credit rules begin to relax, and can the FED keep mortgage rates low. While some relaxation of credit rules are likely the banks risk models have been completely overhauled so the effect will be muted. Mortgage rates are on the rise again which will cut into disposable income. Unemployment relentlessly continues further cutting consumer spending. Firms are cutting costs and investment so are unlikely to move much on wages or increase employment as they pay down their debt.<br /> This is without looking at the potential taxation increases coming down the line in a few years, the risks of currency devaluations, treasury debt problems, china continuing to play ball, California going bankrupt, Commercial real estate imploding etc. Despite having some reservations about the data, the report shows that consumer spending was down again despite a 1.1 percent rise in disposable income. Next months figures will not include social benefit rises, personal income allowance changes and yearly pay review changes, so we might expect the report to be worse next month. With government demand down with the exception of defense the real economy can be seen to be treading water at the best.
The question then becomes will credit rules begin to relax, and can the FED keep mortgage rates low. While some relaxation of credit rules are likely the banks risk models have been completely overhauled so the effect will be muted. Mortgage rates are on the rise again which will cut into disposable income. Unemployment relentlessly continues further cutting consumer spending. Firms are cutting costs and investment so are unlikely to move much on wages or increase employment as they pay down their debt.
This is without looking at the potential taxation increases coming down the line in a few years, the risks of currency devaluations, treasury debt problems, china continuing to play ball, California going bankrupt, Commercial real estate imploding etc.

]]> By: kackermann http://www.nakedcapitalism.com/2009/06/guest-post-what-personal-consumption.html#comment-48292 kackermann Wed, 03 Jun 2009 07:22:32 +0000 http://www.nakedcapitalism.com/2009/06/guest-post-what-personal-consumption-data-means-for-the-stock-market/#comment-48292 Wages are not going to go up until there is low unemployment.<br /><br />Some of the professional fields may see modest gains is business is good, be we are still shedding jobs.<br /><br />I see the figure of 10% unemployment spoken quite a bit, but my personal feeling is that number might be way too low.<br /><br />What is going to fuel an upturn? Foreign demand for American goods? Expanded credit?<br /><br />Hey, my confirmation word is spermos. Wages are not going to go up until there is low unemployment.

Some of the professional fields may see modest gains is business is good, be we are still shedding jobs.

I see the figure of 10% unemployment spoken quite a bit, but my personal feeling is that number might be way too low.

What is going to fuel an upturn? Foreign demand for American goods? Expanded credit?

Hey, my confirmation word is spermos.

]]> By: Jay http://www.nakedcapitalism.com/2009/06/guest-post-what-personal-consumption.html#comment-48289 Jay Wed, 03 Jun 2009 05:46:02 +0000 http://www.nakedcapitalism.com/2009/06/guest-post-what-personal-consumption-data-means-for-the-stock-market/#comment-48289 I can assure you this recession will go into a depression. The feds is wasting too much money trying to delay the inevitable and making it worst. I can assure you this recession will go into a depression. The feds is wasting too much money trying to delay the inevitable and making it worst.

]]> By: beetgirl http://www.nakedcapitalism.com/2009/06/guest-post-what-personal-consumption.html#comment-48279 beetgirl Tue, 02 Jun 2009 21:57:50 +0000 http://www.nakedcapitalism.com/2009/06/guest-post-what-personal-consumption-data-means-for-the-stock-market/#comment-48279 wages need to move up . or its over. wealth effect is not cash in hand. and is pretty much meaningless where i am from. <br /><br />s.o.s.!<br />help me! <br />too far out of equilibrium!<br /> we are going to tip over! pay me more hurry!<br /><br />ahhhhhhhhhhhhhhhhhhhhhhhhhh! wages need to move up . or its over. wealth effect is not cash in hand. and is pretty much meaningless where i am from.

s.o.s.!
help me!
too far out of equilibrium!
we are going to tip over! pay me more hurry!

ahhhhhhhhhhhhhhhhhhhhhhhhhh!

]]> By: ndk http://www.nakedcapitalism.com/2009/06/guest-post-what-personal-consumption.html#comment-48278 ndk Tue, 02 Jun 2009 21:46:39 +0000 http://www.nakedcapitalism.com/2009/06/guest-post-what-personal-consumption-data-means-for-the-stock-market/#comment-48278 I think this post would be much more useful if it also included analysis of the recent and anticipated trends in the income half of the cash flow statement. I think it's easily as salient to our current problems than the expenditure side of the sheet. We saw incomes rise fairly dramatically in April, breaking with a bad trend in prior months. <a HREF="http://www.rgemonitor.com/us-monitor/256963/households_saving_the_fiscal_stimulus_possible_deleveraging_while_consumption_stabilizes" REL="nofollow">Some of it was stimulus, but not all</a>. This really surprised me, because there's such extraordinary unemployment, underemployment, and low employment to population, but I try not to argue with data.<br /><br />If <i>nominal</i> incomes really begin to rise, there may be room for increased savings as well as sustained consumption. <a HREF="http://www.federalreserve.gov/releases/housedebt/" REL="nofollow">Debt service is a large portion of household expenditures.</a>As you do note, middle class incomes have been under immense pressure from global trade, corporations with revenue drops, and, IMO, a decline in the marginal value of a human's labor. <a HREF="http://economistsview.typepad.com/economistsview/2008/04/the-coming-coll.html" REL="nofollow">Elizabeth Warren has been rightly harping on this for a long time.</a> That's probably a big factor in the increase in indebtedness to begin with.<br /><br />Will this trend continue? I don't know either way. I do know that a serious decline in the USD is the best way to increase nominal wages. Any wage gains in absence of a break of the CNY peg will be gradual, as wages <a HREF="http://www.forbes.com/2009/05/05/china-consumer-wage-business-economy-growth.html" REL="nofollow">even in China</a> are not increasing as rapidly as they had been before. But 13% is still exceptionally quick growth in wages, and there's ample room in there for American wages to begin growing once employment trends turn around.<br /><br />And that could leave room for consumption and paying down of debts, at the expense of lenders and savers again. I think this post would be much more useful if it also included analysis of the recent and anticipated trends in the income half of the cash flow statement. I think it’s easily as salient to our current problems than the expenditure side of the sheet. We saw incomes rise fairly dramatically in April, breaking with a bad trend in prior months. Some of it was stimulus, but not all. This really surprised me, because there’s such extraordinary unemployment, underemployment, and low employment to population, but I try not to argue with data.

If nominal incomes really begin to rise, there may be room for increased savings as well as sustained consumption. Debt service is a large portion of household expenditures.As you do note, middle class incomes have been under immense pressure from global trade, corporations with revenue drops, and, IMO, a decline in the marginal value of a human’s labor. Elizabeth Warren has been rightly harping on this for a long time. That’s probably a big factor in the increase in indebtedness to begin with.

Will this trend continue? I don’t know either way. I do know that a serious decline in the USD is the best way to increase nominal wages. Any wage gains in absence of a break of the CNY peg will be gradual, as wages even in China are not increasing as rapidly as they had been before. But 13% is still exceptionally quick growth in wages, and there’s ample room in there for American wages to begin growing once employment trends turn around.

And that could leave room for consumption and paying down of debts, at the expense of lenders and savers again.

]]> By: Leo Kolivakis http://www.nakedcapitalism.com/2009/06/guest-post-what-personal-consumption.html#comment-48277 Leo Kolivakis Tue, 02 Jun 2009 21:35:43 +0000 http://www.nakedcapitalism.com/2009/06/guest-post-what-personal-consumption-data-means-for-the-stock-market/#comment-48277 Hi Edward,<br /><br />One thing you have to keep in mind is the wealth effect. As stocks soar and house prices stabilize, confidence picks up and epople will spend more. <br /><br />But the consumer won't forget this recession for a long time and I think this will cap spending. Moreover, profits might look good on comparable year-over-year levels, they certainly will not be anything extraordinary.<br /><br />In short, this will be the most meagre recovery ever. The problem is that all that excess liquidity is fueling speculative activity in stocks, bonds, currencies, and commodities. How long will this party last?<br /><br />cheers,<br /><br />Leo Hi Edward,

One thing you have to keep in mind is the wealth effect. As stocks soar and house prices stabilize, confidence picks up and epople will spend more.

But the consumer won’t forget this recession for a long time and I think this will cap spending. Moreover, profits might look good on comparable year-over-year levels, they certainly will not be anything extraordinary.

In short, this will be the most meagre recovery ever. The problem is that all that excess liquidity is fueling speculative activity in stocks, bonds, currencies, and commodities. How long will this party last?

cheers,

Leo

]]>