U.S. consumer spending down 1% in December
U.S. consumer spending contracted more than anticipated in December 2008, declining by 1.0%. However, this number is a look into the past and does little to help predict how spending will trend going forward.
My read on future trends has much to do with trend consumption patterns an debt. On Friday, I reported that GDP showed a sharp deterioration in durable goods spending. In that post, I mentioned that the unsustainable increase in consumption as a percentage of GDP is moving back toward trend. Moreover, this consumption has been partly debt-fuelled; Debt to GDP levels have also increased markedly over the past decades to unsustainable levels. Now, that we are in a sharp downturn where credit is restricted, this pattern cannot continue.
Therefore, I see this report, in conjunction with these other data points as confirming the trend toward increased savings, increased debt reduction and lower spending in the U.S. going forward. Given the level of job losses is still increasing, we should expect consumption to decrease even more going forward.
See the Bloomberg video below for another take on the numbers and their implication for the broader economy by Carl Weinberg of High Frequency Economics. You should note he has some scary words on Japan and their predicament but more upbeat words on China.
About Edward Harrison
- ADP sees nearly 700,000 job losses in December 7 Jan 2009
- Chart of the day: US Federal government spending 25 Jun 2008
- Good news on income and spending 27 Jun 2008
- Chart of the day: consumer credit growth 29 May 2008
- Avoid consumer stocks 18 May 2008
Consumer spending may be down, but spending doesnt seem to stop. We are slowly spending our way into a Socialistic state with hyperinflation, and owned by China.