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An Update On Consumer Frugality: Americans Staying Home More, Reading Books

Tyler Durden's picture


Today's Breakfast with Dave has an updated perspective on the contraction of the US consumer, after yesterday's income and spending update. And good news for Amazon: Americans are finally rememberizing how to read good.

From Gluskin Sheff's David Rosenberg:

U.S. personal income came in below expected, coming in at +0.1% MoM in January versus expectations of a 0.4% increase. This was the weakest increase in six months but the gain was held back by declines in interest, dividend and farm incomes — the key was that wages and salaries rose 0.35%, to the second decimal place, the strongest in nine months. Transfers from the government have become a mainstay, rising 0.7% MoM in January and 12% on a year-over-year basis. Just to make matters more confusing, ‘real personal income excluding government transfers’ fell 0.2% MoM and this is the measure the NBER uses to determine if the economy is in recession or expansion.

What about the spending side? Well, in nominal dollars, consumer outlays rose to what appears to be a healthy 0.5% MoM pace, and +0.3% in real terms. In fact, we have the consumer now having a +2% “build in” so far for Q1. But 60% of that headline consumer spending print came from food and energy — everything else rose a tepid 0.2%. In fact, spending on durables or ‘big ticket’ items rose by less than 0.1% in its weakest showing in four months. Almost all the growth was in non-durables, which surged 1.8% and most of that were groceries and gasoline — the two ‘G’s. Services eked an advance of less than 0.2%, held back by housing/utilities.

All in, the gap between income and spending growth last month pulled the savings rate down to 3.3% in January from 4.2% in December, the lowest it has been since October 2008. This is indeed a surprising result, but then again, the government has been doing everything it can to promote consumption over the course of the past year.

While spending of all kinds still shows up in the GDP data whether it be on speedboats or ice cream, we think it is important to do a proper accounting of what the drivers are in any given month, quarter or year. It is tough for us to come to the conclusion that the consumer is feeling too good about the future when spending on items that requires a high degree of confidence over the economic outlook tapers off as was the case in January. Auto spending was cut by 1.2%, the first decline since last September. Furniture spending fell 0.5%. Home improvement outlays dropped 2.1%. Just a few examples about how the household sector still refuses to make a long-term commitment to the economy.
But spending on feel-good pleasure stuff certainly did improve.

  • Personal care products jumped 2.9% (more cosmetics).
  • Clothing rose 0.6% (women’s +1.0%; men’s +0.4% — surprised?).
  • Health services were up 2.9%.
  • Magazines/newspapers rose 1.1% and books by 2.1%.
  • Spending on cable picked up 0.9%.
  • Jewellry rose 1.7%.
  • Video/audio equipment spending increased 1.1%.
  • Spending at restaurants rose 0.7%

While people did spend more on luxury items and things to help them improve their mood during these tumultuous times, there was still very much a frugal ‘stay at home’ cocooning theme in the spending report. For example, there was less spending activity on sports events (-0.7%), amusement parks (-0.3%) and movie theaters (-4.2%). Instead, people spent more money on books (+2.1%), cable (+0.9%) and television sets (+0.7%). Games and toys were up 1.4% — family fun for everyone! While there was more money for fast food outlets, grocery spending was more robust during the month (+1%). People cut back on their travel, that is for sure too — rails down 1.5% and airline spending was flat. Hotels were cut back by 4.4%.

There was also a bit of a ‘do it yourself’ theme in the data too — sewing items up 1.6%, clothing materials also up 1.6%, auto parts rose 0.7% and furniture repairs were cut back by 0.2% while laundry services stagnated. Accounting and business services spending was sliced 0.7%. Interestingly enough, we can still see a relatively high level of insecurity in the data. How else to explain that gambling rose 0.6% in January and within that even more spending on lotteries, which has risen in each and every month since January 2009?

Full Rosenberg note here.


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Tue, 03/02/2010 - 11:22 | Link to Comment deadhead
deadhead's picture

I would love to see an analysis resolving the discrepancy between increased sales and decreasing sales tax revenues.  Something is not right here.....

Tue, 03/02/2010 - 11:44 | Link to Comment sawyer
sawyer's picture

Look at what items have a sales tax and which don't. More online ordering?

Tue, 03/02/2010 - 12:26 | Link to Comment Ripped Chunk
Ripped Chunk's picture

The online sales tax "exemption" going away soon.

Tue, 03/02/2010 - 20:23 | Link to Comment Stink_Pickle
Stink_Pickle's picture

Agreed totally.  The guuubmint will invariably slime it's way into that transaction to get that dolla dolla bill.

Though we've got to caveat the current online tax setup though:  it's only a loophole now for online sellers that don't have a presence in the state where the purchase is made.  So a lot of online retailers (excluding Amazon, of course) do tack on tax already.

Tue, 03/02/2010 - 23:30 | Link to Comment TheGoodDoctor
TheGoodDoctor's picture

That will be a huge boon to the economy! /sarcasm off

Tue, 03/02/2010 - 12:09 | Link to Comment Anonymous
Tue, 03/02/2010 - 12:11 | Link to Comment Anonymous
Tue, 03/02/2010 - 15:45 | Link to Comment Anonymous
Tue, 03/02/2010 - 12:18 | Link to Comment KidHorn
KidHorn's picture

The most likely explanation is sales numbers are tallied from same store sales. Many stores have gone out of business so the remaining ones do better than they would otherwise.

Tue, 03/02/2010 - 12:42 | Link to Comment bugs_
bugs_'s picture


Tue, 03/02/2010 - 15:56 | Link to Comment Cursive
Cursive's picture


Check out Mish over the last two days.  The sales data are from same store sales, so stores lost to company bankruptcies (e.g. Circuit City) are counted and may actually cause a rise at competitor stores (e.g. Best Buy).  Denniger has been all over this story in the past, too.

Tue, 03/02/2010 - 11:33 | Link to Comment RSDallas
RSDallas's picture

Could be that the sales increases are from such an eanemic level also sales are for relatively inexpensive goods??

Tue, 03/02/2010 - 11:37 | Link to Comment lsbumblebee
lsbumblebee's picture

I'm not so sure that's such a good thing. Check out the top 25 bestsellers:

Oh well. Like Joseph Heller once said, "At least they're reading."

Tue, 03/02/2010 - 11:39 | Link to Comment Anonymous
Tue, 03/02/2010 - 11:54 | Link to Comment Anonymous
Tue, 03/02/2010 - 11:59 | Link to Comment Anonymous
Tue, 03/02/2010 - 11:59 | Link to Comment 10044
10044's picture

Let's all read "Creature from Jekylle Island".

Tue, 03/02/2010 - 12:09 | Link to Comment Anonymous
Tue, 03/02/2010 - 13:16 | Link to Comment knukles
knukles's picture

Book Sales?
Kindle Sales?

Whatever happened to library cards?  Morons, all.

Tue, 03/02/2010 - 12:10 | Link to Comment Anonymous
Tue, 03/02/2010 - 12:15 | Link to Comment Hansel
Hansel's picture

The Derek Zoolander Center For Children Who Can't Read Good And Wanna Learn To Do Other Stuff Good Too teaches kids to read good, and do other stuff good too.  I know because I'm a teacher there.

Tue, 03/02/2010 - 12:20 | Link to Comment rhinotrader
rhinotrader's picture

Well I have blown up. Mkt (RUT 2000) is up 12% in 2 weeks on the only thing I can see is Greece getting a bailout. This mkt has refused to go down and has decimated anyone that I know that is a big trader (1mm+). Good luck, I only wished Zero Hedge would be less negative as it makes you feel right being a trader and hold on a little more then you should. Great site, just constantly wrong.

Tue, 03/02/2010 - 12:33 | Link to Comment Anonymous
Thu, 03/04/2010 - 08:55 | Link to Comment Anonymous
Tue, 03/02/2010 - 15:30 | Link to Comment Hansel
Hansel's picture


Tue, 03/02/2010 - 13:18 | Link to Comment knukles
knukles's picture

So, use it as a contrary indicator.  Or don't use it at all.  Or don't believe everything you reead on the Web.

Everything my mom told me was true.  Nobody else.

Tue, 03/02/2010 - 17:59 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

Americans Staying Home More, Reading Books, and...

...converting their Saiga 12's.

Tue, 03/02/2010 - 13:10 | Link to Comment Anonymous
Tue, 03/02/2010 - 13:28 | Link to Comment Anonymous
Tue, 03/02/2010 - 13:41 | Link to Comment BlackBeard
BlackBeard's picture

Do you believe in magic?

Tue, 03/02/2010 - 13:57 | Link to Comment viahj
viahj's picture

what about booze?  been to a liquor store lately?  sales seem to be booming everytime I go.  isn't there some sort of booze index with regards to the economy?

Tue, 03/02/2010 - 14:33 | Link to Comment Real Estate Geek
Real Estate Geek's picture
  • Personal care products jumped 2.9% (more cosmetics).
  • Clothing rose 0.6% (women’s +1.0%; men’s +0.4% — surprised?).

This makes sense; unemployed women forced to resort to prostitution have gotta try to look their best.

Tue, 03/02/2010 - 14:36 | Link to Comment rhinotrader
rhinotrader's picture

Hansel- Your a idiot, at no time did I blame Zero Hedge, I said they probably should not be so negative as they have been constantly wrong. Look at the track record, every article is negative and are completely biased to short side which has been : WRONG.

Tue, 03/02/2010 - 15:22 | Link to Comment Hansel
Hansel's picture

This site doesn't give stock picks, just information.  No one put a gun to your head and made you choose your investments.  Dick.

Tue, 03/02/2010 - 16:01 | Link to Comment Anonymous
Tue, 03/02/2010 - 15:31 | Link to Comment Anonymous
Tue, 03/02/2010 - 16:13 | Link to Comment Anonymous
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