Something is seriously wrong with the economy. Consumers are only spending on necessities because fees, services, and taxes are all going up. Businesses are closing down at a faster pace than ever before--about 7,000 retail stores have closed since the beginning of the year and over 100,000 people lost their jobs. The unemployment numbers are completely rigged; one-third of the workforce cannot find work! And you tell me people are spending money? I assume you're talking about the top 10% because the rest of us are broke.
16
Maybe Americans are depending on a Bernie or an Elizabeth to wave their magic wand and eliminate all consumer debt? After all, no one has come up with that one yet but there's still time!
5
My real estate taxes just increased. My personal property taxes just increased. My Federal and state income taxes went up in 2018 (not due to income increasing). I am seeing grocery prices double and triple. I don't go out to dinner anymore. I buy clothing now only on sale and am reselling clothing in my closet that I don't wear much. I have no plans to buy new cars (my newest car is a 2006), make major household purchases, paint my house that needs painting (may do it myself on weekends).
No one where I live seems to be concerned about spending in any way. I don't get it. Sure I have savings and investments but the day-to-day picture is not pretty. And in the rural area where I live you can't sell a house - takes years.
8
Am I the only person that reads about the glories of consumerism in terms of the potential degradation of our environment when it has to absorb all the new "stuff"?
13
American corporations are contributing to the MISERY of too many Americans and others.
7
How are consumers paying.? The sustainability of this expansion may be constrained by mounting consumer debt. Also in play here is the 2007-ish 'cash-out refi' that may be fueling consumption spending, i.e., converting an asset or wealth into current consumption. When the contraction comes, and it will, the effects on the overall economy could be severe.
3
Where are you seeing a rise in cash out-refi activity?
2
Maybe consumers are just spending now to get what they can before the president's tariffs price everything beyond their reach.
12
The Collapse is coming as fast and unexpectedly as a 737 Max 8, in the form of an ETF nuclear trigger and the entire Disguised Global Crony Capitalist Empire’s implosion from being overloaded with hidden ‘negative externality cost’ debts.
14
"Should I save it (referring to having purchased a nice gift for a friend) so the doctors and dentists can get more before they bankrupt me?" (Heard at a party). When people have no hope of attaining security, their consumption is no indicator that they're doing well.
22
Dig deeper Neil Irwin.
Consumers are spending and borrowing. Companies are concerned about:
1. Corporate debt quality - every CFO with a brain and a high school education is trembling at the size and unsustainability of the CLO market.
2. Trade policy. What policy? If you are a corporate strategist, how do you know where to invest? It's a global economy. And there is a loose canon rolling around the deck.
3. Corporate thinkers are observing the crushing blow weather events are about to have on many communities across the "corn belt". Farmers have missed an entire season. Food prices will increase. Small businesses that depend on farmers will suffer.
4. The revival of manufacturing in the US is a myth.
Beware of statistics. Just because the affluent are spending more doesn't mean there isn't real trouble brewing. Most Americans are hanging on by a thread and a huge number can't survive just one surprise expense. Pretty unemployment stats mask the realities of low paying jobs.
Also, does anyone actually trust the numbers coming out of this Commerce Department?
26
@Bob Bruce Andersona, a "free" two trillion dollar tax cut helps the corporate mood. The belief that there will be more is cheering, too, unfortunately leaving bleached bones of a stripped people behind. The same lift to mood, belief in bailouts for corporations and investors helps. Print it and they will come. Squeezing workers and quality, various frauds and number games helps. Feeding the market is all. But we're getting low on treats for that bottomless maw. And you're right. It all will crash in garish ways ultimately. But IBGYBG, that's the motto now.
7
The key question is when is our over stimulated economy going to crash? We all know it is not sustainable. I'd expect that one significant glitch will bring down the house of cards, just like what happened in 2008 when George W. Bush blew up the economy with tax cuts, deficit spending and failure to regulate the financial industry.
20
Consumers spend because we have to. Debt, savings, whatever it takes. Prices are going up and real wages are going down.
Businesses know that we dan’t do this forever. Boomers will have less wealth to transfer to our young when we die, so that intergenerational jubilee does not lie ahead. Young people can’t afford families, partly because so much real estate has shifted from purchase to rental. The list goes on and on.
Frankly, climate change is starting to make me believe Mother Nature is pretty rational.
19
@Elizabeth r I don’t know, the restaurants in my neighborhood are packed. People must have plenty of disposable income. It seems to me that the consumer is confident.
2
JT, I'm not sure your seeing packed restaurants is a proof of anything broad in itself. You'd need a lot more information and reason than that. If you looked at the number of store closings, you could say we're near a depression. Anyway, by the time your neighborhood eateries are empty, we won't need to have this discussion. We'll have whole other discussions then.
13
I’m retired & got my check today. Not a cent will be spent on anything unnecessary this month or the next six. I see a recession coming & pray it will appear on tRump’s watch or else MAGA’s will blame the Dems. I predicted the 2008 recession & managed to sell my house at the last minute before people’s wallets closed.
Trust me, this one is gonna be Huuuuge, to use the president’s words. Hunker down & pay off those credit cards. Or you’ll be eating cat food.
29
Three words: credit card debt.
28
This feels like 2008. If there is a recession, I hope it happens before November, 2020, so Trump will be blamed, as he should, along with the wimpy Republicans in Congress who have been so complicit. Democrats will have to clean up the mess as usual.
29
Fake data. Fake markets. Consumer confidence also supposedly peaked around the GR market crash. As did the saving habits of ma&pa. One of those things was and still is based on skewed surveys of pitiful sample sizes. The other can be audited nationwide. Just because a few powerful CEOs exchange glowing anecdotes on the links doesn’t mean the ship isn’t listing. Yet, here we are again. The jobs numbers are still coming in hot when every other week new headlines emerge about layoffs from big names cutting in the tens of thousands. The global debt is untenable at this point and will have to be written off, despite the endless gushing about liquidity across the board. I believe the graffito on the wall reads “Fiat Was Here.” For now, though, markets would have us all believe that everything is priced in, that narratives can be spun any which way whenever desired outcomes aren’t truly met, that rate cuts will provide lasting strength, and that a teetering global economy won’t be met with a haircut so long as the smokescreen that is the U.S.-China trade war is resolved. Consumers are the economy, but you might not guess as much when reviewing the endless parade of schemes envisioned by corporations and governments to pay themselves for mucking up the works.
8
So, US GDP is growing at 2%, not 5-6% as Trump promised.
But US Deficit is now 4.7% of GDP, and rising, as Trump and Laffer said would never happen.
What kind of business borrows 4.7% of its gross sales yet grows grow sales only 2%?
A business headed for bankruptcy!
27
@Capt. Penny
A business intending to monopolize the market, e.g., Amazon.
4
@5barris
You do know that there are millions of small businesses that exist only because they can sell through Amazon? Fulfilled by Amazon isn't the same as sold by Amazon.
4
Why do Americans keep right on buying stuff while corporations and economists are worried about the future? It’s simple. All the young consumer has to do is pull out one of his or her charge cards and shazam—as if by magic, that designer handbag and those expensive running shoes are in the bag, so to speak. The next step is easy. They just have to glance at the bill and send a check for “minimum payment due.” Who cares about that growing “new balance?” Tomorrow may never come.
The revolving charge card: the piece of plastic that ended economic sanity.
20
Consumers are right now. Businesses are right tomorrow.
8
America will learn why trump had so many bankruptcies. Another question that puzzles...Why are Republicans only concerned with deficits when Democrats want to spend?
18
@Ben, don't look at what the republicans say, look at what they want. Their words are merely tools to attain means to those ends, nothing to do with truth or falsehood of their claims.
7
@Ben
Because they're all politicians, no matter what letter comes after their name.
And yet I keep hearing that most Americans cannot come up with $500 in the event of an emergency. Something doesn’t add up. Americans are not spending, the are charging. Big difference. It’s all a house of cards and with the circus in the White House anything can happen.
24
@Oliver I'd be willing to look just where consumers are spending their money. Foods prices are up; medicine and healthcare costs are way up; rents and home repair costs are up. If more people are spending money on items they need (food, shelter, healthcare, clothing) then I don't see that as encouraging at all. If people are spending more money on transportation costs, in spite of low gas prices, that's also not enocuraging. And if they're using credit cards (borrowing) to cover the basics, then we're in deeper you-know-what than we realize.
10
@Phodge Bingo!
Any analysis that does not take into account a multiplex number of variables to combine with a comparable model of the economy with other models, together with empirical numbers such as the pmi, cpi index, confidence indicators, inventory spending, debt levels, trade figures, and the average of economist's projections, is going to be a superficial analysis. This article is no exception.
4
@Aloysius
No one, no group, on econometrist, can ever know better than you what is important to you. No one can plan an economy. The attempt to do so (as exemplified by this article and thousands like it) only results in mixed signals, overvaluations, businesses finding it cheaper to buy politicians and bureaucrats than to actually earn their money, and, in the end, more economic fallout of every kind.
Prices are the only thing that can send that mass of data up and down the line in shorthand. A consumer doesn't need to know why some price went up, only the ability to buy a replacement or to decide not to buy at all. A manufacturer doesn't need to know why his raw materials cost has gone up, only where he can get a replacement or to realize that he can't sell his product at the price he could before. If the price of something goes down, does that make it worthwhile to buy more of it? If a new manufacturing technique comes along, the consumer doesn't have to know or care why the price went down. All of that information is revealed in the single metric of price.
Your number crunchers are as phony as the day is long. They neither know nor care what you want and at what price. All the want is control.
1
Statistics are a measure of the past. Not the future.
Look at the yield curve. The inversion of that curve is telling us the mood of the market looking forward.
The information we are getting from the last quarter is like hearing about a party that happened last night. This morning we may have a hangover.
The deficit, high consumer debt, the increase in auto loan delinquency and yet another crop of grads coming into the workforce with huge student debt that subtracts them from the consumer class fr the foreseeable future means the artificial euphoria of a tax cut is fading.
What the NYT could do is start collecting anecdotal data from the ground. Home sales are slowing for a variety of reasons. That in turn reduces consumption. We are seeing layoffs tick up on the ground.
You will tell us what we already know next quarter.
14
Thank you, for the prosperity Mr Trump. There's always a business cycle so the things may not stay this good indefinitely, but it's certainly far better than the "new normal" under Obama.
4
@Amy Let's remember that of the past 10 years economic prosperity eight were under Obama and only the past two + (riding the wave) under Trump. Let us see if Trump can keep it going ...
16
Consumers aren't spending because we're well off. My family and friends expect prices to rise, and not wages. Prices of goods due to tarriffs, and of needs like medical care and rents because they always do. So buying now makes sense. Soon enough, we'll be done.
10
It astonishes me how much money people are spending. You'd think everybody is rich with the proliferation of premium products. Top of the line cameras, Prada handbags, Gucci shoes, multiple iPhones, packed airline lounges and business class. Mercedes, Audis and BMWs like they're being given away. $100 bottles of tequila and bourbon. Custom kitchens with Sub Zero refrigerators and Wolf stoves. And on and on. All of this for *middle class* people, and all over the world. It's going to stop, and sooner rather than later. It has to. The question is only who will suffer and how much? How many calories are in a Rolex?
12
@Stevenz
It is the last and final hurrah of disaster capitalism. The 2nd Law of Thermodynamics is offstage, waiting. It is always the boss.
10
@Plennie Wingo
No, it the expected outcome of a government that tries to "guide" or even "force" their fingers into every pie.
When politicians decide what gets bought and sold, the first thing to get bought and sold are the politicians.
2
Of course there is always the yield curve inversion. It has lasted a full quarter, which has been a 100% leading indicator of a recession over the last 7 recessions. If it holds this time we could be in a recession by next summer. I doubt it would be severe, but our normal tools, monetary policy and fiscal stimulus aren’t really available. Interest rates are already extremely low, and we just spent a trillion on a poor stimulus package. So it may be a shallow but longer than normal.
15
@Kyle Samuels
We haven't let a recession run its course in almost 40 years. There is so much deadwood floating around you could build a whole new house of cards with it ... and unless we finally let it run its course, that's all we'll achieve again.
2
Consumer confidence in June fell alot. At 73 I look at trends and basic economics had many courses years ago in economics, but it still holds. Wall Street is no predictor of how great things are. Gee, remember the sudden crash of 29, the dotcom crash of 1990's, the housing crash of 2008. Check the unemployment insurance filings for the last several months all going up. This idea about look at the jobs and yes, what type of jobs and how many are part time that they put two together and say a job was created. Interest rates force them down as the Trump wants lets see he has been bankrupt four times and that is how he made most of his money stiffing creditors and the little guy. Notice the interest rate on credit cards dropping when the rate get cut. Health insurance for those that have it premiums going up with more and more copays and deductables. I live in Ontario we were visited on the weekend it is Canada Day here by busloads of Americans coming here to purchase insulin. Used to be bus trips for gambling or shopping now for cheap meds. More autos have been repossessed in the last year a record. Trump wants more tax cuts, yes, and when someone actually looks at the deficit and debt what do they see. Today the Wall Street Journal of the bankrupt number of fracking and oil firms going bust. Oh, the bust is around the corner end of this year or beginning of next. Wall Street drive up the stock price that is how the CEO makes out like a bandit. Seen the same game. Jim Trautman
29
How much of the consumer spending was from credit cards? People need more than one job to make it to the end of the month. According to the Fed, about 40% of Americans can’t afford an $400 emergency expense. Credit card debt is running at pre 2008 levels The stock market is up, but not 401Ks, why? Who’s doing well?
27
When business is concerned what do they do?, cut cost! That trickles into lower consumer confidence real fast!, it doesn't take much for things to turn around, I say look at the source of consumer confidence, their jobs!!!!
7
Neil is good at this, a true professional.
He's the only honest person hereabouts discussing economic matters.
Luckily for the workers, the business crowd stopped listening to the political advocates in the coastal media decades ago.
2
I have money. I shop at high end places (Tourneau, Barneys, Saks, Neiman Marcus, London Jewelers, auto dealerships). The people I see at those stores are usually Asian or sometimes Middle Eastern. Also, some people from Russia. People are shopping in America, but not many were born in America.
21
Several ways to look at this:
1) My house is still worth $45000 less than what I paid for it in 2006, my health insurance is the bronze plan and the deductible is $12,000, I used up retirement savings and borrowed money in 2009 to keep my business going and am still paying that back -OR-
2)Because the mortgage is now 13 years old I do have some equity in the house, I have health insurance if I get really really really sick, and the business is doing really really well.
-OR-
3) The house has some equity but not enough to buy another house, is there an alloy less than bronze - because that’s the cheapest plan and with a $12k deductible I have to be bleeding profusely to get care, the business is doing well but my skilled labor force can make $15 at Chik-fil-a - difficult to forge ahead with an expansion plan.
20
It depends on China. If the national government their signals it is OK to buy American, then things will soft land or rise.
If they do not, look out.
From my vantage point, unless there is a change the recession has started, it is just not showing in the economic data yet.
13
Excellent points made by readers' posts to this story. If the economy is so great, why is Trump pushing to lower interest rates, why are payday loan companies proliferating, why is consumer debt rising and why is business spending on structures and equipment falling? With Trump, there's a lot of activity without achievement. Even before the 2016 election, economists were predicting a robust economy for the next president. He had the good fortune to inherit a great economy, and the country will pay a steep price for his 2017 corporate tax cuts and runaway spending.
44
I look to the RV sales indicator. RV sales fell in 2007, prior to Lehman failing. RV sales fell in 2000, prior to dot com bust. The first negative year since 2009? 2018. Not all sectors of consumer spending are rising, and confidence may not be quite as good as it seems.
36
This is my favorite comment.
9
The irony is that all those consumers digging themselves into deeper debt are only going to deepen the coming recession. With Trump draining the Treasury with unwise tax cuts there will be very little federal fiscal stimulus available to get us out of this recession. Add to that the accelerating consumer debt that will weaken consumer spending (even on necessities) and you have a recipe for a deep and sustained recession. Unfortunately the Fed will be adding fuel to the fire by lowering interest rates that will have an inflationary effect on the price of those necessities.
Now is the time for saving, not spending my friends.
38
@Mark from Georgia
This really only works for the top 25%. Saving a few hundred dollars per month while skipping on living isn’t going to happen for most Americans. And even if they do it will have minimal assistance if they lose their job.
If you are wealthy though I agree. Good time to sell things to make a profit and build up capital to buy during the recession. After all it’s not that hard. Sell high and buy low. Even better if you don’t have to compete with anyone else because they are out of work and bankrupt.
11
How much of consumer spending is paid for by an increase in consumer debt? And how long can that go on? Is this just another aspect of the Fed keeping rates low?
I am not optimistic ...
12
Wake up.
The climate catastrophe is accelerating.
Everything else is a distraction
38
@William
"climate change catastrophe" means nothing to people who have trouble paying their monthly electricity bill.
As another person has said, most people will believe in the urgency of climate change when those who crow about it the most start acting like it, and changing their behaviors.
When you even have Bill and Melinda Gates said that they exclusively drank bottled water at their Seattle mansion, you know the behavior doesn't match the rhetoric.
8
As an Economics Professor, IMO, this author is in La La Land when it comes to consumer confidence. They are not confident. The are merely spending what they don't have. Ce la vie!
39
@Michael Evidence? Numbers?
1
Consumers are buying with credit cards and business are spending their revenues with shareholders?
19
Consumer debt of all kinds is at record levels. Americans are spending money they don’t have and not paying it back by ignoring the bills in the mail. Americans are just following the lead of its deficit-ridden government that prints money. I’ll just sit back and enjoy watching the financial collapse.
12
@W Smith - I generally agree with you, but I think the impending collapse will be nothing to enjoy. Schadenfreude does not taste nearly as good as schnitzel.
9
Hmmm ... businesses aren’t spending. Your tax dollars/deficit tax breaks at work, folks.
35
Businesses are not spending because they fear shut downs and Democrats taking office. 70 percent tax rates makes you want to tighten your belt. Not invest in new equipment or hiring.
3
@Daphne Sanitz
Please provide proof. This appears to be standard right wing scare tactics without validity.
16
Wasn't increased business investment and spending supposed to be the result of What's His Name's tax cuts?
13
@Daphne SanitzCheck back into the Reagan Years and onward each time there are tax cuts the money does not go into investing in new machines or technology ever read about the decline of the steel industry the bankrupt railroads. The tax cut money goes to purchase the stock on the market so there is less available to the public supply and demand and the share price goes higher and higher. The shareholders get dividends and the senior management whose pay is based on the share price cleanup before the bottom falls out. Nothing to do with Democrats try greed and being stupid. I love now that the economy is prepared for a downturn close to 2008 and it becomes Obama's fault I guess. Jim Trautman
9
All hail the job creators, who are busy figuring out how to save a few more cents per widget/service. Hmmmm ... which country shall we move operations to this month? Think, think, think.
18
It’s gonna be OK.
In the next decade boomers are gonna start kickin the bucket.
Unbelievable wealth is gonna go around, taxes will be collected,
hospitals are gonna make a killing, and the boomer’s kids are gonna inherit trillions of dollars.
The velocity of domestic currency is gonna turbocharge the economy.
3
@New WorldThat's a joke right. Boomers like myself had our parents who lived very old to take care. My wife's parents lived to be almost 100 try reading the latest material on boomers being 65 or more taking cae of their parents. Don't hold your breath waiting for the boomers to save this economy or this country for that matter you will be deeply disappointed. Jim Trautman
11
Ridiculous. My parents are both nearing ninety. Both have been hospitalized multiple times, and have managed to bounce back every time. But each of those hospitalizations and every new medical problem that crops up drains their bank account. This cycle could easily go on for another decade, and by then, they will be as broke as I already am. And none of us are spendthrifts.
8
This is sounding like 2007 when the news would report that corporate spending / revenues were down but the U.S. consumer was able to prop up the economy. It only took a few months of this until the Great Recession reared it’s ugly head. I wonder who bone spurs will blame when this happens?
19
@Michael J
It took way longer than I expected when I was watching it in 2005. So be prepared for it to go on much longer. If Trump wins he will likely eat the recession. It’s very likely though whoever is next in office will have a major problem on their hands.
I actually hope it’s Warren. She will hold corrupt people accountable for their actions. But that is me wanting economic justice for people who hide behind corporations to protect their profits.
18
Why aren't big businesses spending? Because, since St Ronnie's reign, we have permitted unregulated consolidation such that most large corporations now exert monopolistic or at least oligopolistic control of their own industries. As many are transnational corporations, their reach is global. Even within industries where a half dozen or more major players seem to compete, tacit agreements develop on pricing and territory. Therefore they face little real competition and are no longer subject to the useful destructive forces of capitalism. Absent market competition there are no pressures to innovate, or invest or improve quality or compete for employees (i.e. raise worker wages). CEO's simply use monopolistic profits to buy back stock and thereby give themselves wholly underserved raises.
25
Missing is the impact of debt, lots of it and much of it at negative interest rates. This imposes constraints on both monetary and fiscal policy. With little room for policy errors, uncertainty increases, dampening ‘animal spirits’. We’re on a knife edge and if we wait too long we’re sure to fall off the wrong side.
7
Well, all our manufacturing customers are rescheduling and reducing demand for the rest of the year. Aluminum ingot prices and energy prices, despite the Trump threats and interventions, are generally down. What's an employer to do? Lay-offs and reduced hours. Bonuses will soon be smaller or none at all. Then what do you think our employees will do? Go out and but more stuff? Don't think so. The consumer reaction is delayed because we've been having good economic times over the past year. Won't last. Never has, never will. Expect Trump flailing and GOP super deficit spending, but when the momentum turns, it goes downhill.
12
If there is going to be a big slowdown on the horizon, I just hope it's developed before November 2020. The economy is the only strong point in Trump's argument for reelection.
16
Americans got their first raises in 10 years this year. Yes we are spending for a few minutes. Despite this small blip, wages will stagnate again while businesses continue to invest in the c-suite, buy back stock to drive up stock prices to help their rich friends and outsource, offshore and cut costs, all while wondering why no one is buying their products. Until businesses invest in their businesses instead of their offshore accounts, our economy will be near dead and our lower and middle classes will continue to despair.
16
With rents soaring and prescription prices at the pharmacy going through the roof not to mention an increase in food prices due to the tariffs, it won't be long before consumers stop discretionary spending.
28
@Jacquie
Rents soaring? In Idaho?
2
@Beezlebulby: Yes, Boise is experiencing a population boom as Californians flee housing prices in their state. We're seeing the same thing in Texas. My entire family are California refugees, scattered to the four winds in search of affordable housing.
4
I’ve heard Idaho is beautiful
"business spending on structures and equipment will have fallen at annualized rates of 4.6 percent and 4.4 percent."
This could be the most important statement in the entire article. Currently US business are in debt to the tune of $6.3 trillion with about $2.1 trillion cash to service said debt. The problem is not that business has been running up massive amounts of debt, but how they have been spending it. It has been mostly spent to pay dividends to shareholders, and stock buybacks to prop up already inflated prices. Had it been used to actually expand the business and increase productivity, I'd sleep a little easier, but as it is, all that is happening could be another debt bubble very similar to the real estate bubble of 2007/8.
As long as the old debt can be retired with new debt at the same or lower rates, the party just goes on. A small rise in rates, however, increases the cost of debt servicing and if the industries are cutting back on structures and equipment, this will have ripple effects throughout the economy. Think about all those suppliers and workers who had the bottom drop out of their businesses when the real estate market collapsed.
If businesses begin to default on debt and interest rates are close to 0, where does the rescue come from this time?
36
@John Keglovitz
You forgot crippling the taxes on government.
The wealthy are literally forcing us to raise taxes on them during the next recession to directly employ people and bypass them as middle man.
4
Millennials and elders are our largest population groups. Neither are spending much. Many millennials are not big buyers of goods- especially cars and houses which is where a lot of consumer dollars go toward. Many elders are no longer big buyers of goods- especially cars, houses and other stuff.
Automation has replaced what once was a healthy and dynamic workforce. Machines don't buy goods either.
I can't think of a better indicator for an economic downturn than an economy reliant on consumer spending, especially an economy operating in a Trumpian climate that favors nationalist policies.
29
People are willing to hold long term debt at very low interest rates. The President of the US is screaming at the fed to lower interest rates. When economic prosperity is growing interest rates go up, not down.
15
Consumer spending is reverse looking, corporate spending is forward looking and they don't really conflict with each other. Corporate spending is the better prognosticator.
17
The most tangible result of the trade war is the rising dollar/yuan ratio - from 6.27 in early 2018 to 6.85 today, an increase of about 9.25%, almost exactly cancelling out the 10% tariffs imposed on China. It looks like a stalemate - but actually it is a magnification of the status quo: the US expands its consumer economy at the expense of US exports while China doubles down and investing in the future.
What supports that conclusion? The "Trade Weighted U.S. Dollar Index" is the dollar vs. basket of currencies index, which over the same time period has risen from 85 to 91.27 today today, an increase of 7.4%. So China's export prices have remained relatively stable for the rest of the world, while US export prices have shot up dramatically. Terrible for US exports from farm products to mfg of advanced components and machinery.
Yet this very paper ran a headline story yesterday ran a headline article yesterday claiming that China would cease to be the worlds factory as a result of the trade war - an incredibly naive piece of ego massaging feel good journalism.
The truth is that China is feeling the pinch from rising export market challengers at the low end - steel, aluminum, etc, and their survival depends on moving up tech. To that end, the 9+% increase in the dollar is just what the doctor ordered. Never mind the US market, while the rest of the world is ripe for picking. Our eyes closed, on the precipice, shoelaces tied together.
9
the article missed one key element (or, at best only lightly touched on it) and that is consumer debt. From what I have read, consumer debt for student loans and cars are in dangerous territory and housing debt is being financed through an as yet unproven private sector investing scheme rather than traditional banks. In my book these factors more than negate the exuberant consumer spending. I see, I see, I see .............RECESSION!
23
@Jimmy
Yes, this article should examine whether consumer spending trends are being underwritten more by debt or by real increases in pay. Is consumer carried debt growing? At what rate? How are interest rates on consumer debt trending, and how might changes there impact consumer spending, based on past trends?
17
The unanswered question is: "What are consumers spending their money on?" If they have been replacing worn out durable items and necessities, that could keep the economy going without the businesses needing more people to fill the demand. Also, how much is being spent on things like eating out, vacations, entertainment, et cetera? These don't cause employers to hire more people either.
Then we have to consider that we are pretty much where America was in the 1990's where unemployment was at all time lows but the actual drivers could not sustain their employment. Of course, boomers (like me) are retiring in droves, there are fewer immigrants taking jobs, the some demographics are actually shrinking in size. So, there are jobs being filled but there are no reasons for businesses to hire more folks, build more facilities, et cetera.
The devil is in the details and we haven't seen a report on the details of what areas of the economy are seeing increased business and which ones aren't.
10
I've been in the Credit industry for a long time. Anyone who is paying attention knows that Americans are, for the most part, deeply in debt, and not the good kind. Just look at your average town filled with finance companies, pay-day loan operations and pawn shops. You can finance just about everything. Credit card debt is enormous. So is student loan debt. Then there's the health care industry that literally controls most peoples' lives with all the premiums, deductibles, co pays, medications and the ridiculous cost of simply going in for a check-up. Think about the all the "vultures" who hover in the background of many daily transactions, the collection agencies and attorneys who can't wait to pick your bones. Americans are all about bigger houses, bigger trucks, bigger yards, bigger jobs, bigger everything and they are willing to go into debt for all of it regardless of the consequences. It's tragic.
79
@mrfreeze6 Very well stated and to the point.
I don't have enough the savvy to define how the money supply is being expanded by the pay-day lenders, pawn shops, and credit card pirates. But what I see makes me wish the Fed would tighten. One thing I am certain of is that the business cycle has not been eliminated.
9
@mrfreeze6Just back from five weeks in Simi Valley Calif. and area even with the Calif. economy booming or so the rumor goes there were shops, malls closed and for rent. Ate at a nice restaurant and the next week the place was up for sale. No, like the crash of 2008 remember Allan Greenspan saying it would not happen it was like letting the air out of a balloon alittle how did that work out. No, these things happen almost overnight. Trump cut the interest rates when you are tapped out it does not matter. An Administration of reality tv show hosts including the major economic forecasters. It is like that Jim Carey movie. Jim Trautman
10
We need better measures of consumer spending. Who's spending and what they are buying. Not a single number.
I'm in the top quintile for middle class income and am driving a 12 year old car, because as a software developer, I don't make enough money to live beyond modestly in Silicon Valley. The "the basics" here are very expensive. A 3.7% uptick is, if anything, a bit of catching up by consumers who have deferred purchases out of economic insecurity.
26
@OSS Architect. Yes. My dishwasher stopped working recently. Well, now I just wash everything by hand. So called "durable goods" are no longer that durable. I don't have excess money to buy a new one and it's OK with me.
14
“Das Volk” don’t have a clue and don’t care. I need/want this so...Business, on the other hand does have choices. They don’t want a warehouse full of “stuff” they are unable to sell, so, they lean toward the paranoid in long term production decision making. Economists call this forward thinking “leading indicators”. It would be worth your time to look at the numbers. They ain’t great and this next one is going to be a real bummer.
18
It's a misleading photo. The Bloomindale's bags don't conatin designer clothing. One bag has a Zwilling box, Zwilling makes crockpots and frying pans. Another bag has comforter in it. Maybe a pillow. Not expensive items. Neither of the other two bags looks like it holds a box of shoes or a Moncler jacket or anything. No suits. My sense is that the items in the bag total less than 200 dollars. It's not some Carrie Bradshaw shopping spree. It's someone buy a pan and a pillow. They are Bed Bath & Beyond items bought at Bloomingdales.
10
@Anti-Marx I use/reuse designer bags when I shop at Goodwill.
6
the WSJ disagrees with this opinion
1
@james alan
They used to be really good balanced news. Rupert Murdoch owns them now so tread cautiously.
We know from 40+ years of cutting taxes and fed rates that we blow large credit bubbles. At some point the credit can expand no further. At some point the bubble will burst and any gains from working class citizens will be lost.
Trump isn’t doing anything new. There is nothing proving some major for profit to infinity future. It’s really only a question of when the knife will drop and big money will hand off to the little guy.
5
I would guess that consumer spending is the last thing to end in an economic cycle because consumers are the last to benefit in an economic cycle.
Recovery from a recession seems to start after a couple of quarters — or longer — of downturn, which increases unemployment and suppresses labor costs in addition to pushing down raw materials prices, rents and other real estate costs.
As corporate business improves demand eventually improves for labor and wages begin to creep up, allowing consumers to feel safe to spend.
5
American consumers power over 2/3's of our economy. I'd listen to them.
The tariffs with China will not destroy our economy.
There is a world of suppliers out there. China is not the only game in town.
1
@bobj
"American consumers power over 2/3's of our economy. I'd listen to them."
That means listening to everything they say, not just the parts that sound pretty and convenient for headlines and politicians pitches. And a huge and growing fraction of that consumer spending you're bringing up, is from debt, not savings or income. Yes, some of this is from overindulgence in luxuries (which in itself raises questions about the reliability of the consumer as a barometer), but what's especially concerning now is that so much consumer debt is due to the skyrocketing prices of necessities. Things like healthcare, college tuition, housing, even food which aren't properly counted in inflation figures.
Also I'd be careful about discounting the importance of China. It's now the leading trade partner with dozens of nations across the world, outpacing the United States. So the tariffs do more than just damage direct US-China trade. They run the risk of damaging global trade and causing multiple hits on the US economy in the process.
16
Part of the problem is the American consumer's need to buy and hoard. This is really not studied enough as people are filling basements, garages, and houses full of things they don't need. I have friends who have televisions in every room including the bath, multiple sets of cookware never used, and thousands of pairs of shoes and handbags. It's an American pathology.
30
@Andrew
or they may be hoarding needed things. if one makes popcorn, say, every night, and knows of the awful weather in the midwest - might they not buy a year's worth of the stuff [it's shelf stable]?
3
@linh I understand if you're elderly or wary of going out in inclement weather, but 100 boxes of Pop Secret?
6
@Andrew I see no evidence that the average person has thousands of pairs of shoes and handbags, or multiple sets of cookware never used. And where do they put it all? I have a large house and I couldn't find a place for that many shoes, etc. Also, whether someone else needs something is up to them. I enjoy baking and I have several different sizes and shapes of cake pans, several different sizes and shapes of bread pans, and several different sizes of cookie sheets. You may think I don't need them, but I use them all the time.
5
The supposedly "upbeat" consumer spending figures cited are grossly misleading--that spending is largely debt-based, and heavily weighted to things like healthcare costs and student loans that are not discretionary nor based on actual available income. This is a historically disastrous credit bubble, not a sign of a healthy economy.
The USA's bloated, horrifically expensive healthcare system "improves" consumer spending and GDP by forcing millions of Americans into crippling debt. Many are now tackling hospital bills with multiple credit cards!
America's equally bloated college tuition system also "improves" consumer spending with $1.6 trillion in student loans. The return of subprime housing and lending has likewise "improved" consumer spending by fueling additional debt bubbles, as has the auto loan bubble, now at over $1 trillion and showing signs of 2007-style instability.
So the sweet sounding consumer spending news is based on massive bubbles, not real income and spending power. US GDP is similarly misleading due to juicing by these record credit bubbles, just as unemployment and jobs numbers are juiced by the millions of temp and gig jobs that don't pay a living wage, It's difficult to even get accurate assessments of the US economy when politicians have such massive incentive to inflate bubble after new bubble and hide the true underlying state of the economy, and what people can afford with actual income and savings instead of debt.
52
@Radek
I agree without question as well as the notion and fact that there is no incentive for saving except for those of us that have the discipline to do it.
3
Say it loud, we love credit cards!
6
Perhaps a study could be done on consumer net worth, rather then spending. A family spending more on healthcare and rent because they have to is very different from a family spending more money on vacations because they can.
58
Consumers usually spent with irrational exuberance when times seem good. Businesses have longer memories and are smarter.
We've seen this so many times - take for example the years prior to 2008, before the housing crash and now car loans and CC debt.
Ignorant consumers are headed for a BIG fall and a huge b business contraction. THIS TIME, however, there will be no bailout because Trump has seen t all the money on gifts to the rich.
Be warned - free money for stupidity is a thing of the past.
20
Do not buy anything made in China. Spend ethically and selectively. Vote your conscience and wallet.
9
@Another Nobody
it's too late to go back, but maybe this is an incentive for manufacturers to return to quality - within our usa.
my GE clock radio [1968] works perfectly. i have clothing from that era through the '90s made here and in mexico which has yet to show wear, despite playing sports and horseback riding etc.
china is cheap mass production at its' worst.
4
I'm surprised so many readers of the NYT complain about the economy when unemployment is at record low levels. Maybe some folks complain when the glass is half full and 'really whine' when the glass is half empty...
3
Unemployment is low because people are working 2 or 3 jobs,many of them being g part time jobs without benefits, to pay off their bills.
33
What would happen if in masses we all stopped paying our credit card bills and auto and home loans. Like a Hong Kong special, delivered on the one percent that controls the remaining ninety nine percent
10
I find this disheartening because I think we (nation) must have a consumer-driven recession if we are to have any realistic chance of getting the Chief Clown relegated to a role to which he is MUCH BETTER suited: past President.
Toward that end, consumers with (ha ha) discretionary spending capacity need to postpone said discretionary spending in order to throw the economy into a short-term recession (painful as that may be).
Otherwise, it will be four more years from this White House of Horrors.
7
@Peter Stix The chief clown massively distorted the economics of expensing true costs against tax liabilities. My household bucked up when O'Bama paranoia caused the capital markets to collapse and my employer to basically reduce my department to a skeleton crew. We continued to spend. Now, with my taxes being increased we are cutting back our spending, not because we have to, but because we were lied to by Trump & co.
4
Seems to me that achieving economic security through savings and investment is unattainable for most. Who can possibly save enough money on today's stagnating salaries for a down payment for a house, children's higher education, for retirement, for emergencies, for vacations, etc.
With real economic security unattainable, many have decided to settled for some smattering of satisfaction and well being by buying (often on credit) inexpensive clothes, video games, etc.
Not an irrational choice. But also not a choice that indicates a healthy economy or society.
41
Well, businesses employ consumers, so I think I know which view will win out in the end.
3
@Cfiverson, yes, and businesses need customers. So now who wins?
1
I am seeing a significant rise in household products and groceries. This indicates to me that we are in a recession already. Also, dining out increased quite a bit in the last few months. It is forcing me to question purchases as I am on a fixed income.
21
@Kris. Me too! I haven't eaten in a restaurant for more than 5 years. My last Starbuck's coffee was over 10 years ago. Thanks to the so-called tax cuts, my finances have been devastated. The last thing I purchased was $10 for a Bring Our Troops Home Now bumper sticker. I drive a 1996 Toyota Tercel. I have all the clothing I need. If I spend extra it's for organic food and gallons of water at the health food store.
4
@Suzanne Wheat - Buy a good water filter and save money by filtering tap water, it's the same as the water you are paying big money for.
2
First these statistics are not nearly sensitive enough to make such comparisons, next a business only spends money when they think spending it will make more money, you can be optimistic about the economy and not need to spend any additional money. Individuals are different, but they too should be paying off their debt in good times, rather than spending money. They might also be investing. It is no where near so simple as this makes it seem.
3
There is a debt bomb hanging over our funny money economy and there will be a reckoning. The only question is when.
38
americans will continue to spend because that's what americans do. most don't care about (or understand) the deficit, tariffs, business investments, etc. they just want stuff.
16
Americans buy things because we are completely saturated in marketing. We don’t know anymore what we really want or need. We are hypnotized.
I, among many, would prefer better protection from this mind control inundation.
41
For heaven sake...it is so misleading, almost dishonest to say the economy is great...when in fact only a very few at the top are enjoying themselves.
68
There--"everyone you know?" From your description of them, that's not many people.
3
American business can keep the economy growing if maybe they just pay their lowest paid workers more, instead of sitting on piles of record profits. That extra money in the paycheck goes immediately right back into economic spending and activity.
37
I hate article like this. Economic data is regarded as messages from unknowable gods with no attempt to study the basic economics,
As the FED knows, 40% of households do not have enough money to handle a $400 emergency. About 75% of those think they could borrow the money & the other 25% are just up the creek.
Since consumers are still buying stuff, this means household debt should be rising.
It is.
Businesspersons aren't stupid. They know this cannot continue forever. Why can't it?
Well, where does the money people need come from? The article seems to suppose that people get it when they need it by borrowing from banks. When a bank loans you $100, it creates $100. BUT if it's a big bank, the FED requires it to have $10 in reserves to back up that loan.
Where does that $10 come from?
Ultimately it comes from the federal gov because they (thru the FED) are the only folks who can create money outside of the banks. If the gov were creating more money, consumers would be getting more & would need to borrow less.
How does the gov get money to us?
It spends it. It fixes roads and bridges. It supports education. It funds research. Etc., etc., etc. If it taxes the money back, people cannot spend it, so what matters is the deficit which tells us how much money the gov is sending to us net to spend and to banks to use for reserves.
It can't be random spending. It has to get to the people who need it and will spend it, not to those who do not need it and use it to speculate.
20
(cont) BUT there are times when for some reason, the economy CANNOT produce more stuff. Then adding more money, will cause prices to go thru the roof.
Let's look at some cases of hyperinflation. The most common cause is shortages of some kind.
Weimar - During & right after WWI over 1,000,000 Germans died from starvation. Germany simply did not have enough arable land to feed its people. Food prices went through the roof. There was clearly no way to increase production. But people were starving. So the Weimar government began to print money. Of course, this raised prices further. But it is important to note that inflation caused the printing of money, not vice versa.
In Venezuela, oil was practically their only product. When the price of oil fell 60%, they got instant hyperinflation.
In Zimbabwe, the farms were taken from those who knew how to run them and given to those who didn't. production plunged, prices rose.
Our inflation of the 1970's - There was the failure of the anchovy harvest off the coast of Peru due to the 1972 El Nino which contributed to a worldwide spike in food prices because of the anchovy's role as an ingredient in animal feed.. Then there was the oil embargo.
And so on.
A reader called max summed all of this up:
"So much of our economic issues could be solved if people understood that the US cannot run out of money, and how hard it is to cause hyper-inflation from government spending alone."
7
I certainly am not shopping Bloomies. Maybe TJ Max or Target. Are we sure consumer debt is not increasing also?
14
The answer if that consumer debt is at an all-time high...and those historically low interest rates??? not for credit card holders who have been gouged over the past 11 years to the tune of 19-20% interest while banks, et al., pay their account holders barely 1-2% these days. No wonder people are working 2 and sometimes 3 jobs. And try buying "healthy" food, the cost of which has skyrocketed as opposed to the junk variety which is still relatively cheap, but toxic for one's health.
33
Irwin writes that, "Trade wars and the fading impact of the 2017 corporate tax cuts seem to be holding back businesses’ investment intentions."
"The fading impact of the 2017 tax cuts"? Those massive tax cuts that are creating the biggest peacetime budget deficits in history? The tax cuts that the Republicans promised us would create massive new investments?
Was Neil Irwin "had" by the Republicans? Why should those cuts be "fading" already? Perhaps The Times should acknowledge what reputable, i.e., Democratic, economists were warning from the beginning: that these cuts would go nowhere but into higher executive pay packages and huge corporate stock buybacks.
Let's see The Upshot interview all of the Republicans responsible for the Trump tax cuts and let them explain why the effect is "fading."
65
@Sean. Senator Kennedy of Louisiana said, before voting for the tax cut, that he would vote against it if he believed it would add one penny to the national debt. A classic borrow-and-spend profligate Republican. Three of the four years since WWII with budget surpluses, were under the peace-and-prosperity presidency of Democratic President Clinton.
16
The Internet makes it easy to buy stuff and Americans are consumers. I’d expect most people won’t slow down their purchasing until things get really bad.
5
@Berk. I recently cut off Amazon Prime because I wanted to watch a movie on their video that they wanted to charge extra for. I have tightened my belt in other areas as well. Where I live foreclosures are up--mostly McMansions.
3
"On Friday, the Commerce Department reported that consumption spending rose a healthy 0.4 percent in May"
Let me see, isn't Wilbur Ross the Commerce Secretary? The same person who has lied to Congress about the rationale of adding the citizenship question to the 202 Census.
Think I'll trust the American business on this one. Not that their any angels of truth.
22
So, business investment has dropped some 4.5%? Isn't this precisely the opposite of what Trumpublicans predicted would be the effect of the tax cut? Weren't they telling us that business investment would boost the economic growth rate to 4%? Memo to Neil Irwin: please start interviewing Trumpublican economists and ask them to explain why their predictions were so far off.
33
How can consumers be spending more? What are they spending it on and where? Big retail stores like Sears, Macy's Penney's, are all going out of business or closing stores. I work in retail and I don't see people out spending money. Are they buying big box items? What? We're constantly being told that consumer spending is good, but we are never told what they are buying. Meanwhile, business are cutting back on inventory. Why? Because there products are not being purchased.
39
@kmgh
Retail sales increased ~3% in May 2019 over 2018. While many stores are going out of business, there are many other stores (Costco, Wal-Mart, Target, Wayfair, Amazon, etc.) that take the place of closing stores. And online sales are expected to grow ~11% in 2019. Also, car sales and student loans make up a big part of the spending increase.
8
@kmgh
As a supporter of small business (and an ex-owner of a store) the answer to your question is straightforward.
The photo that accompanied the digital version of the story showed a shopping bag-laden pedestrian walking down the street, predisposing the assumption that shopping in-store is holding up. As you have observed that is not the case. Money is being spent on-line, not on Main Street.
The effect of this is that stores are stock less inventory, customers can't find what they want and so they turn to mail-order. A self-damning cycle. And one that is frustrating for someone such as myself who hates shopping on line.
13
This article points out an interesting divergence in economic sentiments. Consumer spending and U.S. personal income beat expectations in May, and consumer sentiment/comfort level hit the highest level since 2000, including Democrats at ~60%. Yet, as Neil Irwin points out, it is doom and gloom over in business land. CEOs/corporate confidence levels are falling, revenue outlook is at seven-year low, and a Morgan Stanley analyst stated US corporate confidence has entered freefall. I agree with Neil Irwin's assessment likening current events to those of 2015. And majority of economists, analysts and CEOs are not expecting recession anytime soon.
4
It will keep going until credit contracts. At which point any gains for the consumers who work for a living will be erased. Then the big guys with capital will come back and buy all the working classes assets at a discount to sell back them at extortion prices.
46
Exactly correct. With each economic downturn (like 2008), investors step in to buy the assets of the average American who gets left behind. That's why Trump says he loves recessions: corporations loaded with cash from tax law changes a poised to buy more homes and businesses out from under us. Soon.
30
Yes. This. Exactly.
2
@Mathias: Precisely. More and more assets concentrated in the hands of fewer and fewer people. The U.S. is building a landed aristocracy. Waiting for Trump to crown himself king and start handing out titles to his buddies.
5
This discussion should include how much debt Americans hold. Sure, consumers keep buying stuff, but should they be?
131
@myasara - Right, banks can lend only so much money depending on how large their reserves are. When they lend too much as in 1929 and 2008, the economy falls off a cliff. In 2001 the big banks had 27 or 28 times as much in outstanding loans as they did in reserves.
What confuses people is that they fail to distinguish between private debt (loans from banks) and public (federal) debt. Since the federal government can create as much money (thru the FED) as it wants, it has an INFINITE amount of money. It will never run out. Thus public debt is nothing to worry about, but private debt is deadly.
Factoid: In October of 1929 the public debt of the federal government was 16% of our GDP. This was followed by disaster.
In 1946, public debt was 109% of GDP followed by 27 years of Great Prosperity.
13
@Len Charlap
You sound a little worried about possible bank liquidity/credit problems? Except for student loans, everyone is servicing their debt on time. And the big banks passed all of their stress tests with flying colors in June, so liquidity/credit/reserve issues are unlikely.
https://www.economist.com/finance-and-economics/2019/07/01/americas-banks-sail-through-the-feds-annual-stress-tests
3
@Chat Cannelle - Yeah, so far, but look at household and corporate debt and at the trend thereof. If the federal gov. or the FED doesn't add more money, this can't go very long.
8
Should we really be cheering because we continue shopping and consuming, pretending that as long as we consume to our heart's content everything will be just fine?
Do we even consider for a moment the new realities around resource depletion, destruction of the natural world , our unsustainable ways of living and working, the scientific realities about the climate crisis and therefore the existential threat to life, including human life? Are we nuts, fools or just insane? Species extinction is far more serious and real now than at anytime in human history, and we humans are the cause. We are now officially living in the Anthropocene era. "Relating to or denoting the current geological age, viewed as the period during which human activity has been the dominant influence on climate and the environment. We've become the major force of nature in this new Anthropocene epoch."
Solving the massive challenges of western over-consumption, the climate crisis and destruction of the natural world requires human beings - especially those of us in the U.S. and western cultures - to look ourselves in the mirror and ask, "what will my children and grandchildren think of me as their world disintegrates? Did you go shopping or did you make the changes and investments we all know are necessary? Did you listen to trump lies, J. Inhof, the lying Repubs in Congress & their fossil fuel paymasters, or did you listen to 98% of real climate scientists? Did you take action or go shopping?
102
This is the most insightful comment so far. It is excessive consumption that has to stop. It is destroying our planet, our and our children’s only home. The consumer index as a measure of success is a vicious lie. We have to change or the planet will change all for us. The internet is paid for by marketing and we are all suckers.
5
If the Trump supports close their wallets and the Tiffany crowd gets hit by Biden’s or Warren’s or Sanders’ tax increases then all bets are off...big recession!
3
Yeah, but the big tax money from Warren's and Sanders plans will flow to poor who will immediately spend them on necessary things keeping economy going.
16
@Charlie
Agreed in the sense that I expect them to punish a democrat. Hope democrats have a plan to directly employ people and bypass the coming recession.
The recession is inevitable when credit contracts. That is why Trump is attacking the fed.
6
No. Warren and Sanders want to tax the top tier of money that the very rich make. And use that to help everyone. It would go into healthcare or education and infrastructure.
7
Consumer spending is being fueled by higher and higher debt. When consumers get tapped out, they will dramatically slow their spending at the first sign of any problems. Count on it.
45
I've worked through in financial technology through several financial crises, the internet bubble and then the subprime debacle, and oft-cited positive indicators make me worry about the next disaster, or at least something I feel portended disaster, very low unemployment and high consumer spending.
Reasonable people can look at our economy and see it is based on numerous eat-your-children practices, low interest rates to prop up the economy - granted this is and as needed - huge tax cuts to the wealthy, decreased oversight of finance and its abusive practices, the decimation of the federal government, loss of the environment through increased exploitation, decreased protection from global warming and its effects, etc. The list goes on.
The reasonable response was tossed out in the Republican response, evident now, in the corrupt practices it relentlessly pushes. The short-term proclivities of the US is evident, even in the complete lack of analysis of consumer 'confidence', with nothing about debt. Jared Diamond's analysis of why societies fail is notably apt.
84
As person who enjoys reading about macroeconomics I always read these stories...then I always feel outraged about "healthy" growth. The planet CANNOT sustain "growth forever".
The United States consumes far too many resources for the size of it's population. Consumption needs...no, MUST shrink in this country if the planet is going to have a future.
Consumption should not be considered any kind of sign of "health". Happiness index, quality of life index, THOSE are measures of "health" of a country.
I keep dreaming of a future where a home and food are a guaranteed right and we can get rid of this "consumption" nonsense that encourages waste, environmental destruction, and pointless jobs that accomplish nothing except keeping people poor and in terrible health making products that no one needs yet feels compelled to purchase with money they don't have.
198
@Darin Herrick - Forever is a long time, but since the universe is now considered to be infinite, if you give me forever. I can find resources to last forever.
On a more practical level, for all intents and purposes, the solar system is infinite. We have had the technology to go out there for a long time now, but we have lacked the will to do so. We should be mining iron, etc. in the asteroids, getting efficient solar power from arrays in orbit, building O,Neil habitats, etc., etc., etc.
Just think if the defense budget and the space budget had been reversed for the last 50 years.
Or we can sit around looking down into the mud and thinking how happy we are.
10
@Darin Herrick Your the-planet-can’t-sustain-endless-growth argument is frequently trotted out, usually by people who misunderstand the concept of economic growth. I don’t have space to go into any detail here, so I’ll just make a couple of points.
1. Without economic growth, the total pool of available wealth is fixed, and the only way for an individual or group to become wealthier is at the expense of other individuals and groups. End growth and you end democracy.
2. Economic growth is not synonymous with increasing fossil fuel consumption. Wealth is manifested in many ways, many of which degrade the natural environment little if at all. Increasing renewable energy production, better primary care healthcare, better, more widespread education and more frequent, higher quality back rubs are all examples of wealth expansion that don’t push us closer to the limit of Earth’s carrying capacity.
8
Sad truth is that around here many folks are actually hoping for a recession....even though it will hurt the poor the most.
Sickening.
6
They are not hoping, they are worrying about recession that always comes. And they are worrying how the poor will cope with it, considering the Government money shortage, that is the result of tax-cut.
19
@Joe Paper
Hi Joe - please expand your comment. Why would anyone hope for a recession - unless they're radically shorting the market. Who, in Pottstown, has such a hope - and why.
And also - Joe are you a relative of mine? My last name is also Paper.
Hank Paper ([email protected])
4
My family is spending more money, it is just all going to health insurance and healthcare.
174
As long as artificially low interest rates continue I see no end to consumer spending nor an end to the smoke and mirror economy that has lurched along from boom to bust since Milton Friedmans’ hijacking of good economic policy along with the neatly dovetailing of the dissolution of Breton Woods. Going off the gold standard, creation of a fiat currency, opening the borders and destroying unions and as Greenspan summed up the plan going forward for our consumer based economy which was to “ give them credit, we can’t give them raises”. This of course has come at a price to savers and those without the surplus capital to pull up a chair at the Wall Street casino: continuing a rise in a market that even the most sophisticated investors shake their head at; a market that has been kept alive with massive tax breaks used to buy back shares and zero bound( negative interest rates really when real inflation is priced in)rates for a decade or more not to mention the continued use of the fed to prop up the economy any time there’s a blip. We no longer have a free market system we have a system whereby those with the most lobbyists dictate to our government the winners and the losers: the winners being Wall Street, Silicon Valley and their money men money the losers being labor and the former middle class and the rest of us. .
60
@Ted
Spot on! But the majority of Americans are too busy shopping---the drug of their choice when their lives are shallow.
I recommend watching a BBC documentary series by Adam Curtis: "The Century of the Self." It explains how the consumerism beast was created & developed, from the beginning of the 20th Century to the present.
6
@nicole H Thank you Nicole I will indeed watch the documentary, I’m a big fan of all things BBC.
2
@Ted
As a complement to Nicole H’s recommendation, I suggest Marcuse, H. An Essay on Liberation. Boston: Beacon Press, 1969. See his discussion of “commodity fetishism” on p. 11.
1
I know Trump wants 4 or 5 percent growth in GDP.. but as a mature post industrial consumption consumer economy... 2 percent is just fine really.
As for consumers as an economic indicator... it's inaccurate and invalid as the consumer is generally the last component in the equation to taper back and slow spending. In fact.. consumers will often binge right before a recession... and often go into debt in the process.
Consumer debt load is a much more important figure to track in my view.. and it represents a good indicator of overall economic health.. because as consumer debt rises.. it eventually puts pressure on spending rates.
20
@Chuck - Actually what has killed us in the past is that too much private debt has wrecked the banking system.
3
Consumer spending is trailing edge activity rooted in the moment. Corporate, or business has to think about where things are going, so that is the leading indicator. Remember, the housing marked was all a froth until it abruptly wasn’t in ‘08.
The economy has become like the climate, producing all kinds of effects that break from expectations. This is not a new normal, both portend disaster; it is the wild pitching of the plane before it falls from the sky.
54
And the guy who seized the controls is too busy flirting with a cute, chubby Korean to even care that the plane only has two sensors and one stopped working.
11
I know very few consumers who are doing well. Most are one disease or injury away from bankruptcy. Most are heavily in debt splitting their spending across several credit cards. Most are working more than one job to keep the lights on. What America are you living in?
195
@Patricia you are absolutely correct with your comments. I honestly do not know where this ridiculous information comes from.
2
It's another faux boom. The Fed is currently keeping the end from coming today but it will, the only question is when and how bad.
The latter is tough to predict.
Bush 2 and Clinton and Newt gave us 10 yrs. of drunk economic driving until the end came 10 yrs later in 2008.
1-Consumer, corporate Dept at all time high.
2-National debt soaring due to the corporate welfare tax cuts.
3-Newly minted college graduates ready for debtors prison.
4-Insane trump sane wars ready to cripple the world's economy.
5-Restricting immigration, the engine of the American economy.
6-Aging population needing medicare and SS funding..
etc. etc. As mentioned the end will come the only question is when and how bad.
41
@Paul When will the end come? Japan has been running on fumes for 30 years. Just enjoy the party while it lasts.
4
@Paul - All these things are true, but 2. is not important. In 1929, the national debt was 16% of GDP. In 1946, the debt owed to the public was 109% of GDP. It is about 77% today.
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@Len Charlap- No matter which way you slice it, it's big and growing by leaps and bounds. Somebody has to pay the interest on it and eventually some of the principle to make it manageable otherwise the interest on the debt will be the biggest part of our budget.
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Sometimes I read these NYT articles about how consumer spending is on the rise, and I wonder what planet these happy consumers are on. Me? I am living on planet Working Two-Jobs. I have no idea what is buoying consumers other than "irrational exuberance." I was exuberant the night before last when I received the proceeds from my tip pool: $20. Using my employee discount, I exuberantly bought a small dessert to share with my spouse and child. Somehow I don't think that is to what Mr. Irwin is referring.
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@MerMer, that is where you made the mistake, big spender that you are. You should have resold the pie at a profit, and put the money in your savings account and wait for the bank's monthly charges to decimate it. Then do it all over again.
Or take a third "Gig," and slave away for several more hours and make the gig company more money leaving you with less than the minimum wage. That is the new American way.
You should be happy and grateful you are living in the richest, greatest country in the world! Trump is so happy with having made America Great again, he has moved on to KAG. I can't wait...
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Lots of sales, easy credit, Amazon. Consumer spending results. I suspect most of the spending is for small items - clothes, cell phones etc. How much of the spending is on big ticket items?
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@Eero
A lot of consumer spending has been, is, and will remain focused on things the consumer does not actually need... just wants. In this regard... size of purchase has little real bearing... as it is the total spend on items not actually needed that matters.
That said... what really matters is are consumers spending inside their income curve or outside their income curve. Any consumer that perpetually spends outside their income curve is destined to be perpetually in debt and under financial stress.. which leads to a range of insecurities... from food, to housing, etc.
We are a nation of poor consumption... where a majority of Americans spend outside of their income curve. And please note... actual income is often not an indicator.. because while lower income consumers are under more pressure to borrow to buy... even upper middle class consumers often spend well outside their income curve... which is a discipline issue, not an actual income issue.
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@Eero
Now is a horrible time to be in the market for the biggest of big-ticket items, a new home. Rates are low, which is nice, but there are an insane number of buyers out there right now.
4
@Graham B.
And lower interest rates simply drive up the price of a home. Most folks only look at the monthly payment.
7
I think the low cost of borrowing is driving consumption. Let's face it, "deficits don't matter" - Dick Cheney, is now official policy. Any and all concern about deficits is now dead and buried. Modern Monetary Theory has become the guiding principle whether acknowledged or not.
6 years ago when I refinanced my farm, I never dreamed I would see such low interest again. Now I'm thinking I can refi for 3% in a year or two. Perhaps I can be a Zombie Farmer for decades. (actually I just rent to a real farmer). The investor is left with little alternative but to pile into assets that will hopefully appreciate, because buying fixed income is a plan to fail.
The two obvious downsides are the erosion of the dollar in the long run, and the sustaining of Zombie companies.
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@Epicurus
For the average consumer... debt (the consumers deficit) IS a big deal once a recession sets in.
Expansions and recessions are like the seasons of the year... they move in cycles from one to the other. Some consumers plan for the cycle and manage accordingly... others pretend it's only ever expansion... and never recession.
For government policy.. what matters is controlling expansion from overheating and controlling recession from being a steep hard pull back. We have been under a rolling and sometimes bumpy economic expansion for so many years now.. I actually think the US has forgotten how to properly manage the policy throttles of expansion and recession such that they move at moderated pace to insure the best economic outcome overall.
We have to hope that the FED continues it's long standing policies since the 2008 recession and does not allow Trump and the republican controlled senate or democratic controlled house do anything nutty that drives the country into a steep deep recession when the next one hits.
That said... Australia is the poster child of modern 1st world economic management. They have literally not experienced a serious recession cycle in almost 30 years. Of course they also do not see the extreme expansion spikes either. They seem to have worked it out for their particular economy.
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@Epicurus
I’m curious how long the deregulation will assist it along and what problems will arise from it.
Anyone have any insight into the new toxic asset or Wall Street Ponzi scheme based on credit? I don’t think we have any active watch dogs in any industry under trump. So it will fall on the states to try and police corruption as best as possible.
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@Epicurus - Your comment shows you haven't any idea what MMT is about. MMT is all about deficits and the inflation creating monet may cause.
Look at these for a start:
http://www.slideshare.net/MitchGreen/mmt-basics-you-cannot-consider-the-deficit-in-isolation
and
http://www.slideshare.net/MitchGreen/its-what-you-know-for-sure-that-just-aint-so-11872791
3
May I remind the readers that stock market highs are present at the HEIGHT of consumer confidence index. Not the reverse. Savings and investment matter more that contemporaneous spending And then we get "OOPS!"
8
Missing data: Consumer debt of all kinds is at an all time high. If they are amassing debt to consume, or consuming based on optimism rather than reality, the bill will come due sooner rather than later.
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@tom Other missing data: Despite low mortgage interest rates, many people cannot afford a home because of the need for a significant down payment. Also, affordable housing that is safe for habitation is not abundant in many of the areas where jobs are increasing (ex: Atlanta).
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They are doing well because they are spending, or because they are optimistic? I would have thought better of the Upshot. Doing well would mean decreasing levels of debt, increased levels of saving/investment, and increasing incomes. Significantly. Simply spending more without those markers could mean that consumers, as have happened so many times before, simply put more on credit.
Often, consumer spending bodes well for the economy, but it doesn't bode well for consumers themselves. Americans, being short-sighted as they are, are not a good barometer for much, other than how many are running over a proverbial cliff.
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@James Igoe
In recent months while monitoring business news, I have purchased personal clothing beyond immediate needs in anticipation of rapidly-increasing prices.
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@5barris - When I saw this response, I wondered what the mock/satire was targeted at. Several other people said the same thing, but that just doesn't make sense, since inflation seems to be heading down. Are you serious?
1
@James Igoe
I am serious.
Consider the emphasis in recent months on tariffs on foreign-produced goods, and then look at the labels of your clothes indicating where they were manufactured.
1