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The Myth About Consumer Spending Being Up

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posted on Apr, 5 2009 @ 11:22 PM
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I have been extraordinarily skeptical of some of the "good news" coming out lately as the stock markets have been rallying so I did a little research and found this interesting article about consumer spending.

www.businessweek.com...



Here’s a more detailed version of the analysis in my latest BW story. Right now it looks like personal consumption expenditures have fallen by only 0.4%, or $40 billion, over the past year (that’s nominal dollars). For an economy the size of the U.S., $40 billion is a rounding error.

But that number didn’t seem right, given the devastation in the economy, so I took a closer look. I started with an advantage—I’ve written about these numbers before. When we hear the words ‘consumer spending’ or even ‘personal consumption expenditure’, the image that comes to our mind is a household buying food, clothing, televisions, haircuts, cars, etc etc—all the things we buy in our daily lives. Let’s call these ‘pocketbook’ expenses—we make the decision about whether to reach into our pocketbook or wallet and pay for them.

However, there are a lot of categories in the BEA’s definition of personal consumption expenditures which are not ‘pocketbook’ expenses. In particular, there are four important categories in PCE which shouldn’t arguably shouldn’t count as personal consumption.


The author of the article makes these findings:



Meanwhle pocketbook spending—all the things that we normally think of as consumer spending—is down by 3.1%, or $200 billion, over the past year. This is by far the biggest year over year plunge since 1959, when the current data series starts. In fact, measured on a year over year quarterly basis, the fourth quarter was the first time that pocketbook spending fell, in nominal terms.


The MSM is lying. They are trying to convince us that its not as bad as we think it is, but in reality it is probably worse.

I also think that there is more spending in the early part of the year because most people (including the recently unemployed) are getting their tax returns now.

What happens when the tax returns are done and all those people who will run out of unemployment benefits soon?

www.google.com...


In the coming weeks and months, hundreds of thousands of jobless Americans will exhaust their unemployment benefits, just when it's never been harder to find a job.


I have seen a number of doomsayers believing that something nasty is going to happen in the second half of the year. With the economy like this, I don't doubt it.




posted on Apr, 6 2009 @ 12:06 AM
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I can sure tell you that my personal spending is not reduced. However I certainly am getting less products for my buck.

That personal reflection aside, how can consumer spending NOT be down in these econmic times? Millions out of work. Half a million and more each month? Of course spending has to be down.

Maybe I should look for that controversial Barbi doll my daughter had and send it to a MSM organization and address it to one of the talking heads. The doll that said, "Math is hard. Let's go shopping".



posted on Apr, 6 2009 @ 12:14 AM
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I may have to disagree with you on this. I have little doubt that it is quite possible that consumer spending is up.... Here is why from personal experience -

The mid to upper middle class are raiding and cashing their 401 k accounts and spending it... on land, supplies, silver, gold, guns, ammo, food and stuffing cash into fireproof boxes.


When the stories came out a few months ago about seizing retirement accounts to "create" a new government "social security" it hit home. Why should we save this money if there is a possibility that it may go "poof" from either market collapse or Government seizure.

Better to spend it now while the damned dollar is worth something before the nasty possibilities can happen.

It isn't just the "fringe" conspiracy people anymore... these stories hit the MSM and people took the hint. Half of the people I work with have done the max 50% "loan" from their 401 k programs to pay off debt and buy things they may need.


What you are seeing is another "canalization" of existing wealth and MAY actually be quite factual.



posted on Apr, 6 2009 @ 02:53 PM
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You don't have to agree with me, the author of the article I posted is Michael Mandel who is the Chief econimist at Business Week Magazine. This gentleman holds a Ph. D from Harvard, and he is a professor at the NYU Stern School of Business.

link

I think his back ground in economics trumps one person's personal observations.



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