Tag Archives: Consumers

Get Ready For An Economic Wake-Up Call This Holiday Season, by Brandon Smith

Is the economic slowly circling the drain? From Brandon Smith at alt-market.com:

If we are to measure the concept of “economic recovery” in real terms, then we would have to look at the fundamentals (not stock markets) and whether or not they’re improving. Unfortunately, not all economic data is presented to the public honestly. Very often it is mired and obscured in a fog of disinformation and false standards.

I would point out, though, that there is relatively accurate information out there in certain areas of the global economy, and it tells us our economic structure is destabilizing. Beyond that, even the rigged numbers are moving into negative territory. But what does all this mean for the holiday retail season, one of the mainstream’s favorite gauges of US financial health? And, if 2019’s holiday profits sink, what does this tell us is going to happen in 2020?

First, let’s start with what we know…

Since we live in a “globalized” economy where everything is supposedly “interdependent”, it helps to examine international export numbers. The US doesn’t manufacture and export much of anything anymore beyond agricultural products, but global markets do expect us to consume the goods of other nations. A decline in exports indicates a failing global economy, but in particular a failing US consumer economy.

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Capitalism Isn’t the Reason We’re Unhappy, by Ryan McMaken

Capitalism is supposedly responsible for most of the world’s ills, while government generally gets a free pass on everything. From Ryan McMaken at mises.org:

Many critics of capitalism have given up trying to claim capitalism makes people poorer. Faced with so many obvious gains in the standard of living, and in reducing poverty worldwide, markets have won the economic debate over whether or not capitalism is the path to material riches.

But the doctrinaire anti-capitalists have other strategies. They’ve now branched out into blaming capitalism for a host of other social, ecological, and psychological ills.

Sometimes, the tactic is to blame capitalism for destroying the earth. Other times, it’s to claim that capitalism, in spite of the material plenty it delivers, makes us miserable.

For example, George Monbiot, columnist at The Guardian blames pro-capitalist ideology for making people, sad, lonely, and unhealthy. Writers cite polls claiming people in richer countries — i.e., more capitalistic ones — are more miserable than people elsewhere. Holly Baxter at The Independent suggests capitalism is the reason elderly people are now so lonely and isolated: capitalism makes us more concerned with buying things than with visiting poor, dying Aunt Ethel.

Claim: Capitalism Wants Us to Be Sad, Needy Consumers

And it’s all by design, it seems. According to Monbiot and other critics of “neoliberalism” — by which they just mean anything resembling a market system — the capitalist ideology is designed to isolate us, and turn us into soulless consumers. This then paves the way for an endless cycle of misery and consumption.

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Why This Is About To Get Far Worse…by Chris Hamilton

Demographically, across the developed world robust growth is not in the cards . From Chris Hamilton at economica.com:

Once upon a time, skeptical analysts cross checked stated growth versus energy consumption…looking for discrepancies as fluctuations in energy consumption are a good proxy for the changes in real economic activity.

Nowadays, the model of printing highly politicized and/or skewed economic data has gone very global.  So, today I offer a couple broad variables to gauge global economic activity; 1) total primary energy consumption data by region, cross checked against 2) their consumer bases (the 0-65yr/old populations).  I break the world down into four different regions to gain a better vantage of the purported global recovery, as follows:

  • OECD (List of 35 nations) representing 17% of global population & 43% of total energy consumption
  • Combined Africa / S. Asia (S. Asia = India, Pakistan, Afghanistan, Bangladesh, Nepal, Bhutan, Sri Lanka, Maldives) representing 41% of global population & 9% of total energy consumption
  • China, representing 19% of global population & 22% of energy consumption
  • “RoW” or Rest of the World, representing 23% of global population & 26% of global energy consumption

The first chart below shows total global primary energy consumption in quadrillion BTU’s from 1980 through 2015 according to the EIA (US Energy Information Administration).  The flattening in consumption since 2012 is plainly visible in the upper right and clearly detailed in the year over year columns in the lower right.  The arrows highlight minimal growth or outright energy consumption declines that were associated with recessionary periods.  The weakness of the current period since 2012 is unparalleled from 1980 on…and even more significant than the sharp but brief downturn of 2009.

To continue reading: Why This Is About To Get Far Worse…

US Credit Card Debt Surpasses Financial Crisis Record, As Student And Auto Loans Hit New All Time High, by Tyler Durden

US consumer revolving debt (credit card debt) just hit a new all-time high. When it comes to debt, nobody beats the USA. From Tyler Durden at zerohedge.com:

Who would have expected that today’s otherwise boring monthly consumer credit report would be the day’s most exciting event. Well, moments ago the monthly update from the Federal Reserve confirmed that as of the end of June, total revolving (i.e. credit card) credit rose to $1,021.7 billion, an increase of $4.1 billion on the month, and a new all time high, taking out the previous record high set during the summer of 2008.

Coupled with the monthly $8.3 billion increase in non-revolving credit, which also rose to an all time high of $2,834.1 billion…

… means that total consumer credit in June increased by $12.4 billion, slightly less than the $13.9 billion expected and modestly less than the $18.4 billion increase in May, to $3,855.8 billion, also a record high.

Taking a closer look at the quarterly update in non-revolving debt, we find that for another consecutive quarter, both student and auto loans hit record highs, of $1.450 trillion and $1.131 trillion respectively, although there does appears to be a modest slowdown in credit issuance for these two largest categories.

Considering the recent sharp revision to the US household savings rate, which wiped out $250 billion in personal savings with the stroke of an excel pen…

… the fact that US households increasingly have to rely on their credit cards to support their daily lives will hardly come as a surprise.

http://www.zerohedge.com/news/2017-08-07/us-credit-card-debt-surpasses-financial-crisis-record-student-and-auto-loans-hit-new

Consumers, Small-Business Owners Souring on This Economy, by Wolf Richter

Nobody is better plugged into the economy than small-business owners, and they’re not buying the recovery story. From Wolf Richter at wolfstreet.com:

“Flashing a recession signal.”

Consumer optimism about the economy is waning, and small-business-owner sentiment is giving off recession vibes. That’s how different surveys are now mucking up the rosy scenario.

Gallup’s Economic Confidence Index, released today, added another dimension. It dropped four points in the week ending April 24, to -16, the lowest since August 2015, and down from positive territory in January 2015.

It left Gallup groping for answers:

Pessimism has increased despite a strong stock market in recent weeks and a persistent low unemployment rate. However, there have been reports of weak retail sales and expectations of low first quarter economic growth. Gas prices have also started to rise, although they remain well below where they were for most of the past decade.

The report also blamed the rhetoric emanating from the presidential primary. Candidates, still unconstraint by the dictum affecting US Presidents to always hype the economy, have unabashedly pointed at some ugly spots in the rosy scenario and have suggested “how they would fix the US economy if elected.” This, Gallup says, rattled some nerves.

In January 2015, the index was at +5. It wasn’t exactly wallowing in exuberance, given its theoretical range of +100 to -100 (it hit -65 during the Financial Crisis). But that was the high point. And it has been zigzagging south ever since.

Consumers don’t live in the Wall-Street economy. They struggle with their daily challenges in the real economy. For them, it’s tough out there. Study after study confirms that about half of them, even those considered middle class, are living from paycheck to paycheck and can’t come up with $500 for emergency purchases.

But the most troubling aspects in the Gallup data simmer beneath the overall index, which is a composite of how Americans see current and future economic conditions.

The current economic conditions index has been trending down gradually. Today’s reading, at -7, is the lowest since November last year, with 23% of Americans saying the current economy is “excellent” or “good,” while 30% said it’s “poor.”

What’s coming down the pike looks even worse, according to Americans in the real economy. The index for future economic conditions plunged 6 points to -25, from an already crummy -19 last week, the lowest since August last year – a time “when the stock market plummeted over concerns about the Chinese economy,” as Gallup reasoned. Only 35% of Americans said the economy is “getting better,” while 60% said it is “getting worse.”

Both measures were positive in January and February 2015!

Also today, the Conference Board released its Consumer Confidence Index for April which, to the great disappointment of economists, fell 1.9 points to 94.2. While the Present Situation Index rose 1.5 points to 116.4, the Expectations Index plunged 4.3 points to 79.3 — confirming the Gallup poll: they’re seeing trouble balling up in the future!

Small businesses have been feeling the blues in a big way for a while. The Small Business Optimism Index for March, released by the National Federation of Independent Business earlier this month, fell to 92.6. As the report put it, the index “has turned decidedly ‘south’ over the last 15 months,” from its recent peak of 100.3 in December 2014:

A “chartist” looking at the data historically might conclude that the Index has clearly hit a top and is flashing a recession signal.

These small business owners were “very pessimistic about the economy.” Only 8% thought now was the right time to expand, while 51% thought now was a bad time to expand, citing as the top two culprits “weak sales” and a “poor economy.”

To continue reading: Consumers, Small-Business Owners Souring on This Economy

Double Whammy Economics, by MN Gordon

The US consumer is pulling in his or her belt and not spending as much, but don’t worry, that always happens just before riproaring econonomic expansions, like the kind we’ve been promised for the last six years. Be patient, it’s just around the corner. From MN Gordon at economicprism.com:

What’s up with the U.S. consumer? They seem to have come to their senses at the worst possible time. They can no longer be counted on to push economic growth up and to the right. Specifically, they’re not spending money on stuff.

According to Wednesday’s Commerce Department report, U.S. retail and food services sales for March declined 0.3 percent from February. Apparently, U.S. consumers are tapering back on auto purchases and spending at restaurants, bars, and clothing and department stores. What’s more, sales have fallen or been flat for each of the first three months of the year.

“We are seeing much less impulse buying and hearing more ‘I need to go home and think about it,’” said Randal Weeks, owner of Gray Living, a home décor store in McKinney Texas. Similar anecdotes are being reported by retailers across the country. What in the world is prompting this consumer ambivalence?

“Shoppers feel uncertain because of a stock market that fell more than 10 percent in six weeks and the recent terror attacks in Europe, said Bob Phibbs, CEO of The Retail Doctor, a consulting company based in Coxsackie, New York. And Gray Living’s Weeks said a few of his customers have said they are uneasy because of the presidential election; they don’t have a sense of how it will turn out.”

Perhaps these explanations have something to do with the consumer’s sudden resistance to spending. Still, such instances haven’t held consumers back in the past. There must be something much, much more demanding at work.

Doing the Opposite

If you recall, way back in 2000, when the economy was crumbling from the tech bubble implosion, Dallas Fed President Robert McTeer told everyone that “everything would be OK if we’d all just hold hands and buy SUVs.” The Fed then proceeded to provide gobs of easy credit. And, for many years, the consumer did their part to borrow and spend it. Moreover, after 9/11, consumption became patriotic.

By artificially holding down government bond yields, central bankers believed the big banks would increase lending and create consumer demand. The increased consumption, said their theory, would stimulate the economy and push inflation up to the Fed’s 2-percent target. In practice, this hasn’t happened.

In fact, as interest rates have fallen economic growth has stagnated. Presently, Swiss and Japanese 10-year government bonds are yielding negative returns. Investors are, in effect, paying these governments for the privilege of loaning them money. Nonetheless, they are not borrowing and spending…they are hoarding cash.

Similarly, Fed policies have continued to focus on stimulating growth with issuances of cheap credit. By comparison, the U.S. 10-Year Treasury note’s yielding about 1.7 percent. Yet even this paltry rate is having the opposite effect of what the Fed intended.

Somehow all the smart and clever government economists miscalculated what it is, exactly, their policies would be doing. Specifically, ultra-low or negative rates are not encouraging consumers to borrow and spend money. To the contrary, they’re encouraging increases in savings.

To continue reading: Double Whammy Economics