Outside the Beltway

Consumer Spending Flat

Steven L. Taylor
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Via the AP:  Americans spend at weakest pace in 20 months

Consumer spending was unchanged, the Commerce Department said Monday. That was the worst result since September 2009. And when adjusted for inflation, spending actually dropped 0.1 percent.

April’s consumer spending figures were revised to show a similar decline when adjusting for inflation. It marked the first decline in inflation-adjusted spending since January 2010.

Incomes rose 0.3 percent for the second straight month. But adjusted for inflation, after-tax incomes increased only 0.1 percent in May, after falling by the same amount in the previous month.

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8 responses to “Consumer Spending Flat”

  1. Dave Schuler Avatar
    Dave Schuler

    This is only a Bad Thing if you believe that consumer spending is the only possible engine for the economy. I’ve seen a lot of favorable reports about Germany in the news lately. Less reported: consumer spending in Germany is a fraction what it is here as a proportion of the economy.

    We need more saving and we need more business spending. We need to export more. That necessarily means that consumer spending must become less important in the total economy.

  2. Gerry W. Avatar
    Gerry W.

    Germany is very worried with the fragile world we live in. They have done some innovative approaches for employment, but they must import more Turkish people and have to deal with Greece. Germany has always in recent years have a public/private partnership. It will be hard to save money as either the jobs are lost or people get paid less. 1/3 of our factories have closed. It is hard to export more when you have less factories. And with half of our products being foreign made, consumer spending seems to be less meaningful. Or at least will not create the jobs that it once did as we don’t make the products. Business is spending overseas and not as much here, and if they spend here, they spend on robots to replace people. And small business cannot develop if you have factories closed in a community. And with all the stimulus spent over the years, there is nothing to pull us out of this mess.

  3. Drew Avatar
    Drew

    Ooops.

    http://www.zerohedge.com/article/dallas-fed-plunges-down-175-expectations-od-32-drop

  4. mattb Avatar
    mattb

    We need more saving and we need more business spending. We need to export more. That necessarily means that consumer spending must become less important in the total economy.

    @Dave, follow up question to this good point…

    From your perspective, what are the important widely reported measures to watch? What are the measures that should be reported?

    And what would it take to shift more attention to them? Is this a government needs to report different stuff? Or that the news should be shifting their reporting?

  5. Drew Avatar
    Drew

    mattb

    You could start with the various Fed office reports on manufacturing. They are issued routinely. See above.

    In addition: purchasing managers reports/PPI and so forth.

  6. Dave Schuler Avatar
    Dave Schuler

    Rate of business formation. It’s been declining for decades and gets practically no press.

  7. mattb Avatar
    mattb

    @Dave

    Rate of business formation.

    How might franchising and expansion of chain retail, services, and restaurants fit into that particular equation?

    I guess franchising would typically register on business formation — if the buying goes through a new LLC — correct?

  8. john personna Avatar
    john personna

    FWIW Consumer Metrics Institute shows us at 500+ days in a second (2010) contraction (after a shorter 2008 contraction). An ugly dataset.

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