Consumer Spending Better than Expected

[Beet]

Give the good news its credit....
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By Courtney Schlisserman

March 6 (Bloomberg) -- The pace of borrowing by U.S. consumers increased in January for the first time in four months as rising joblessness caused Americans to pull out their credit cards to take advantage of post-holiday discounts.

Consumer credit unexpectedly rose by $1.76 billion, or 0.8 percent at an annual rate, to $2.56 trillion, the Federal Reserve said today in Washington. Credit decreased by $7.48 billion in December and a record $9.13 billion in November, more than previously estimated in both months. The Fed’s report doesn’t cover borrowing secured by real estate.

The value of car and truck loans rose 0.7 percent while deep discounts at retailers such as Limited Brands Inc. and Macy’s Inc. boosted consumer spending in January for the first time in seven months. Still, the gains in credit and spending may be short-lived as payrolls drop and banks remain reluctant to lend.

“Consumer credit bounced in January on the heels of sharp declines in November and December,” Steven Wood, president of Insight Economics LLC in Danville, California, said in a note to clients. Overall, Wood said, “consumers are deleveraging along with the rest of the economy, which “does not bode well for real consumer spending in the months ahead.”

Economists had forecast consumer credit would drop $5 billion in January, according to the median of 27 estimates in a Bloomberg News survey. Projections ranged from an $8.1 billion drop to a gain of $3.2 billion.

Revolving debt such as credit cards increased by $926.5 million. Non-revolving debt, including auto loans and mobile home loans, rose by $830.2 million.

Consumer Spending

Other reports indicated consumer spending improved in the first two months of the year as Americans seized on retailers’ discounts. Wal-Mart Stores Inc., TJX Cos. and Aeropostale Inc. yesterday reported better-than-anticipated February sales.

Retailers had less merchandise left over from the holidays in February and offered new spring items, bringing more people out to shop than the month before, Stifel, Nicolaus & Co. analyst Richard Jaffe said.

Retail Metrics, a researcher, said U.S. comparable-store sales rose 0.7 percent in February, better than the 1.1 percent decline analysts had estimated and the first positive result since September. The outcome was helped mostly by Wal-Mart, Retail Metrics President Ken Perkins said.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aLToLRMtZ6wM&refer=home

[Marokai Backbeat]

Leave it to Americans to keep spending even under such terrible financial circumstances.

[cinyc]

Leave it to Americans to keep spending even under such terrible financial circumstances.

Some of this increase likely had to do with yearly COLA increases for Social Security beneficiaries.  Credit card use was pretty flat in the 3Q last year (at least according to Visa) - and the January rise reported in this article isn't all that much.  Debit card use was way up.

There's nothing wrong with consumers spending within their means, by the way.

[phk]

Leave it to Americans to keep spending even under such terrible financial circumstances.

Some of this increase likely had to do with yearly COLA increases for Social Security beneficiaries.  Credit card use was pretty flat in the 3Q last year (at least according to Visa) - and the January rise reported in this article isn't all that much.  Debit card use was way up.

There's nothing wrong with consumers spending within their means, by the way.

Ditto. Spending is what boosts GDP.

[Marokai Backbeat]

I'm hardly arguing against spending, I'm all for that, but it seems like everyone is in debt or struggling to pay their bills and until we make progress on that front we're just digging ourselves deeper in the future.

[opebo]

There's nothing wrong with consumers spending within their means, by the way.

Um.. yes there is - it causes a depression.  We need to increase the means.

But this increase was just depression related - people buying tents for their new life under the bridges, and of course guns.

[cinyc]

There's nothing wrong with consumers spending within their means, by the way.

Um.. yes there is - it causes a depression.  We need to increase the means.

But this increase was just depression related - people buying tents for their new life under the bridges, and of course guns.

Rewarding recklessness is a terrible long-term economic strategy.

[opebo]

Rewarding recklessness is a terrible long-term economic strategy.

What are you talking about?  The problem is not 'recklessness', it is oppression, and that oppression is very deliberate.

[Padfoot]

Nate Silver convinced me that the fat cats on Wall Street wailing about the end of capitalism and the onset of socialism are just throwing themselves a "pity party," as he put it.  All the big wigs who stand lose millions (or perhaps billions) now that there are going to be rules and regulations to keep them from cheating the system are sinking the market to artificial lows.  Perhaps this is the biggest economic hit the US has taken since the Great Depression but its still not nearly that bad and it likely never will be.  Most projections I've heard are putting the end of this recession sometime after July next year.  The rich dudes are just having trouble adjusting to the new reality of things.

[Sam Spade]

Beware - Consumer spending is usually a lagging indicator.

One of the things I've been noticing this month is that some of the lagging indicators are slowing slight bounces, whereas the leading indicators are getting crushed even more.

That a sign to be careful, but a sign that we should get a faux bounce fairly soon.

[○∙◄☻¥tπ[╪AV┼cVê└]

Beware - Consumer spending is usually a lagging indicator.

One of the things I've been noticing this month is that some of the lagging indicators are slowing slight bounces, whereas the leading indicators are getting crushed even more.

That a sign to be careful, but a sign that we should get a faux bounce fairly soon.

Consumer spending is the problem. The supply-siders have run this country into the ground. The problem is a lack of demand. The consumers are too scared to spend any money than they have to, even if they are lucky enough to still be employed.

Also, a lot of the money is going to the wrong areas. Defense? No. Tax cuts. No. Large banks? No. It's time for the money to go to new temporary workers, small businesses, and consumers.

[Sam Spade]

Beware - Consumer spending is usually a lagging indicator.

One of the things I've been noticing this month is that some of the lagging indicators are slowing slight bounces, whereas the leading indicators are getting crushed even more.

That a sign to be careful, but a sign that we should get a faux bounce fairly soon.

Consumer spending is the problem. The supply-siders have run this country into the ground. The problem is a lack of demand. The consumers are too scared to spend any money than they have to, even if they are lucky enough to still be employed.

Also, a lot of the money is going to the wrong areas. Defense? No. Tax cuts. No. Large banks? No. It's time for the money to go to new temporary workers, small businesses, and consumers.

Huh?  Consumer spending is the problem, so more money should go to the consumers?

One of the big forces driving of a lot of the irregularities that will, in time, have to be corrected, is the fact that most of the focus and energy of the world's economy has been on the US consumer (or actually if you want to be broad - Western consumers).  It is simply unsustainable and is presently collapsing in on itself, most likely because the American consumer reach the point of peak debt saturation (my guess).

This problem really, in a certain sense, touches every area of this debt-deflation.  For example, the US (and certain state governments) could not fund its massive pension and health care plans (which are growing at rates much greater than we can ever catch up with them) without this dynamic in place where the US can become a massive debtor nation backing up its credit on increasing the liabilities of the American consumer.  To be fair, we could also not fund our massive military without this dynamic either.

Moreover, the growth in the rest of the developing world was based on placating the American consumer and undercutting the American wage level.  This dynamic survived the last 25 years (its heyday was the last 15 years really) simply because we were able to replace those jobs with high-paying ones in the service and financial sectors.  Well, as you can obviously figure, the service and financial sectors are in the midst of complete collapse here (even though certain half-assed attempts are being made at rebuilding it - see "cap and trade" for example - although that will undoubtedly result in a trade war of some sort with China - more later)

So what does this mean - we're going to have get a decent bit of our old production economy back?  And the only way that will happen is through major wage cuts (or reduction/elimination of many pension/health care benefits, probably both actually) to compete with foreign labor.

When, as I believe will happen, this "financial crisis" or "credit crisis" hits full tilt (which we ain't anywhere near yet), expect it to become a "governmental crisis".  And not just here.

[Sam Spade]

Nate Silver convinced me that the fat cats on Wall Street wailing about the end of capitalism and the onset of socialism are just throwing themselves a "pity party," as he put it.  All the big wigs who stand lose millions (or perhaps billions) now that there are going to be rules and regulations to keep them from cheating the system are sinking the market to artificial lows.  Perhaps this is the biggest economic hit the US has taken since the Great Depression but its still not nearly that bad and it likely never will be.  Most projections I've heard are putting the end of this recession sometime after July next year.  The rich dudes are just having trouble adjusting to the new reality of things.

Nate Silver should stick to political analysis and away from policy and economic analysis.

This piece is almost hilariously bad.

[Lunar]

Nate Silver convinced me that the fat cats on Wall Street wailing about the end of capitalism and the onset of socialism are just throwing themselves a "pity party," as he put it.  All the big wigs who stand lose millions (or perhaps billions) now that there are going to be rules and regulations to keep them from cheating the system are sinking the market to artificial lows.  Perhaps this is the biggest economic hit the US has taken since the Great Depression but its still not nearly that bad and it likely never will be.  Most projections I've heard are putting the end of this recession sometime after July next year.  The rich dudes are just having trouble adjusting to the new reality of things.

Nate Silver should stick to political analysis and away from policy and economic analysis.

This piece is almost hilariously bad.

Maybe you should listen to him, he has an undergraduate degree in economics [WITH HONORS].

don't forget baseball in things he should stick to.

[Beet]

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I don't think the service sector as a whole is a waste- there is certainly healthy demand for services, per se. The financial sector won't recovery for a long time probably, but that's as much a function of how bloated it was at one point in this decade than anything else.

You must be logged in to read this quote.

Trying to regress to an industrial economy won't help, IMO. While it's true we need to get our trade picture in order, there's a reason that we don't want to (and can't) become another low cost industrial exporter. For one thing, the current low cost industrial exporters only exist because we have been what we have been. If we become them as well, there will be no one to consume what we produce. Rather, some of them must become more like us. For another thing, our industrial production hasn't exactly gone away. It is still at 2000 levels, which were very high-- although it is comparatively more in high technology and electronics and less in autos, than it was in 2000. Just bcause industrial employment is down it doesn't mean we have lost industrial production.

[Sam Spade]

I don't think the service sector as a whole is a waste- there is certainly healthy demand for services, per se. The financial sector won't recovery for a long time probably, but that's as much a function of how bloated it was at one point in this decade than anything else.

I don't think I was implying the service sector is a waste, but rather that it enlarged far beyond its real needs in the economy to make up for manufacturing losses.  For example, there simply is little need for employees for thousands of stores selling crappy over-priced apparel to teenage girls - I have often been surprised over the past few years how much that dominates the malls of this country.

You must be logged in to read this quote.

I'm not suggesting that we become a low cost industrial exporter, Beet.  All I'm just saying is that the trade imbalances must be dealt with (so we probably agree there), and in order for that to occur, the US must manufacture more of its own products (and yes - tech is part of that).  This, in turn, will help any recovery to replace job losses caused by the collapse of the financial/service sectors in the upcoming months.

[Beet]

I don't think the service sector as a whole is a waste- there is certainly healthy demand for services, per se. The financial sector won't recovery for a long time probably, but that's as much a function of how bloated it was at one point in this decade than anything else.

I don't think I was implying the service sector is a waste, but rather that it enlarged far beyond its real needs in the economy to make up for manufacturing losses.  For example, there simply is little need for employees for thousands of stores selling crappy over-priced apparel to teenage girls - I have often been surprised over the past few years how much that dominates the malls of this country.

You must be logged in to read this quote.

I'm not suggesting that we become a low cost industrial exporter, Beet.  All I'm just saying is that the trade imbalances must be dealt with (so we probably agree there), and in order for that to occur, the US must manufacture more of its own products (and yes - tech is part of that).  This, in turn, will help any recovery to replace job losses caused by the collapse of the financial/service sectors in the upcoming months.

In that case, it seems that we're in agreement. Sorry if I misconstrued you.  Statements like 'the service sector ... is in the midst of complete collapse' will do that.

[jokerman]

Sam, I don't think what you're proposing is politically feasible, to be honest.  If our two routes are to modernize the U.S. economy, so that were producing the cutting edge of technology and green tech, and keeping our current standards of living, or bringing low-tech industry home, and lowering our standards of living, while the first is going to be harder to accomplish, the public will not stand the latter.