Worst purchase terms in decades
Bloomberg Reports Americans see worst buying conditions in decades of high prices
Data released on Friday showed that the University of Michigan’s preliminary sentiment index rose to 71 from 70.3 in August. The number followed the average score of 72 in a Bloomberg survey of economists.
Terms of purchase for durable household goods, homes and cars have fallen to their lowest levels in decades. The report said the declines were due to complaints about price hikes. Consumers expect inflation to rise by 4.7% over the next year, the highest level since 2008.
The university’s measure of current conditions fell to 77.1, the lowest level since April 2020, from 78.5. The expectations scale rose to 67.1 from 65.1, according to the survey conducted from August 25 to September 12.
Opinion polls are not surprising
Opinion polls are not at all surprising and arguably close to useless. Polls do little other than show current conditions visible in other data.
For example, existing home sales have fallen every month since February. So, yes, the terms of purchase are bad. What did the survey tell us we don’t already know?
And if consumers are not buying homes, they are not buying new appliances, furniture, and cabinets to go home.
Expectations are meaningless both ways. If conditions improve, so will buying, regardless of what consumers currently think about the future.
If conditions worsen, this will lead to real (inflation-adjusted) spending and home purchases.
At least the survey makes sense and matches reality. They don’t always do that.
Cyclical components of GDP
Cyclical cycles such as housing and durable goods are The most important graph in the macro.
Cyclical cycles including housing and durable goods make up only ten to fifteen percent of GDP, but fluctuations represent the differences between growth and recession according to Eric Basmjian at EPB Macro.
The Great Depression in the housing sector is the key to understanding this recession
On July 14, I pursued the above idea in The Great Depression in the housing sector is the key to understanding this recession
Don’t expect strong consumer spending to salvage the situation.
Taking into account revisions and inflation, retail sales remain very weak
Scroll to continue
The amount of nonsense about strong retail spending lately is staggering. It is real (inflation-adjusted) spending that drives GDP, not nominal spending.
Real consumer spending peaked in March 2021 at $236,100 million. It’s now $231,138.
Strong consumer spending? where?
Real spending bottomed out in December of 2021 and rebounded over the next four months, through April.
Also, housing remained strong in 2021 and relatively strong in the first quarter of 2022.
This is why I started the recession in May.
For discussion, please see Taking into account revisions and inflation, retail sales remain very weak
Surveys tell us what we already knew
Economists rely on consumer surveys. I suggest that they better understand the data.
GDP now forecast for Q3 drops to 0.5% due to weak consumer spending
In the meantime, please note that GDP now forecast for Q3 drops to 0.5% due to weak consumer spending
With housing in rock bottom and poised to get worse, I’m expecting a negative third quarter of GDP. But hey, let’s not dare call that a slump.
This post originated in MishTalk.Com
Such reports? I hope so, and if you do, please Subscribe to MishTalk Email Alerts.
Subscribers get an email alert for every post as it happens. Read what you like and you can unsubscribe at any time.
If you subscribe and don’t get email alerts, please check your spam folder.