Tuesday, March 13, 2007
We Are In A Recession
- MoM adjusted total retail would have been negative except for the increase in gas sales.
- Grocery store receipts are negative YoY when adjusted for price increases.
- MoM adjusted for restaurants and bars is negative.
- YoY adjusted and non adjusted for restaurants is negative when price increases are taken into account.
Consumer credit from last week (Jan preliminary) showed moderate increases, no doubt because consumers were appalled by the credit card binge in November. The bottom line is that Q4 2006 total consumer debt rate of increase doubled from Q4 2005. Q4 2006 revolving credit (credit cards, basically) rate of increase nearly doubled from Q4 2005.
What we are seeing in consumer credit is the end of consumer spending financed by mortgage equity extraction (MEW). And what we are seeing in retail is that the consumer cannot borrow enough on credit cards to sustain spending increases.
Now these two reports make it clear that consumer spending will be decisively weak all this year, and that is because of the income distribution involved in those total wage increases reported so positively by the media. The problem is that the top echelon is getting nearly all of it, while the bottom echelon is getting less than enough to compensate for price increases.
The end result is that the housing problems have spread throughout the wider economy. In short, we are experiencing contraction not just in manufacturing, autos and housing, but in consumer spending. Very shortly we should see the four week moving average of initial unemployment claims move past the 350,000 mark.
A Manpower survey reported that employment plans overall are "neutral". My private inquiries show that most big companies that have significant sales to consumers are, if anything, planning job cuts. The problems in housing are due to accelerate because of the ongoing credit contraction in nonprime and Alt-A. What you see is what you get, economically. It's going to be more of the same right through this year and into 2008.
Here is a site with folks observations of how bad inflation is.
Details at http://infohype.blogspot.com
There It Is!
Yep, looks the same from both sides.
It seems like each time we go into recession, we mortgage our future a little more to get back out. (What do we have to show for this last expansion??? - Nothing) Eventually, there will be nothing left to mortgage. Social security/medicare are waiting like a pernicious albatross.