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Is The Inexplicable American Consumer Rebelling?

testosteronepit's picture





 

Wolf Richter   www.testosteronepit.com

The strongest and toughest creatures out there that no one has been able to subdue yet, the inexplicable American consumers, are digging in their heels though the entire power structure has been pushing them relentlessly to buy more and more with money they don’t have, and borrow against future income they might never make, just so that GDP can edge up for another desperate quarter.

But it’s been tough. Despite the Fed’s insistence that inflation is “contained,” or its periodic fear-mongering about deflation, consumers have been hit with rising costs. Tuition has been ballooning—up 21% in California in 2011 alone! Student loan balances exceed $1 trillion. Some parents who are still paying for their own student loans are now watching their kids piling them up too [read.... Next: Bankruptcy for a whole Generation]. Healthcare expenses have seen a meteoric rise. And so have many other items that cut deep into the average budget.

Inflation is a special tax. It’s not that horrid if it’s small, if higher yields compensate investors and savers for it, and if higher wages compensate workers for it. But that hasn’t been the case. The Fed’s Zero Interest Rate Policy has seen to it that entire classes of investors and savers get their clocks cleaned; and wages haven’t kept up with inflation since the wage peak of 2000—with the very logical but brutal goal of bringing wages in line with those in China.

But for a welcome change, disposable income adjusted for inflation, reported earlier this week, actually rose 0.3% in June from May. So spending should have gone up as well. It didn’t. The inexplicable American consumer spent less in June than in May. And April. The decline was focused on goods, the lowest since January.

And instead of buying goods with the additional money they’d earned, they saved! What temerity! It wasn’t a one-month fluke. The savings rate reached 4.4%, after a fairly consistent uptrend from the November low of 3.2%. An unusual and courageous act of rebellion in face of the punishment the Fed inflicts on savers.

There’s other evidence: while new car and truck sales weren’t great in July at a seasonally adjusted annual rate of 14.09 million units—down from June’s 14.38 million and February’s 14.50 million, the high of the year—they concealed ominous undercurrents. Honda’s sales jumped 45.3% and Toyota’s 26.1% over July 2011. After the March 11 earthquake last year, supply-chain problems created shortages, which the flood in Thailand made worse. Brand-loyal buyers who couldn’t find the right model, option package, or color, rather than switching to other makes, delayed their purchase—thus creating pent-up demand. Now, supply problems have been resolved, and buyers are swarming all over their favorite dealerships. This specialized pent-up demand obscured a huge problem: GM’s sales dropped 6.4% and Ford’s 3.8%. The two leaders taking a simultaneous turn south! This doesn’t bode well for total vehicle sales once Honda’s and Toyota’s pent-up demand has been satisfied. Another act of rebellion by the inexplicable American consumer.

But the Commerce Department, in its press release on income and spending, had a convenient answer: blame “the economic turmoil in Europe.” For everything. And then it added what was practically a campaign ad: “Therefore, it is critical that we continue to push for policies that will grow our economy and support our middle class, such as abolishing the Fed (sorry, my screw-up) the remaining proposals in President Obama’s American Jobs Act.” And it goes on to praise Obama’s tax proposal. Priceless! Expunging the last vestiges of objectivity from our government agencies, such as the Department of Commerce whose Bureau of Economic Analysis had collected the numbers.

The cellphone in your pocket is NASA-smart, write Alex Daley and Doug Hornig. Yet it costs just a couple hundred dollars. So why is it that these rising technical capabilities are leading to drastically falling prices in tech products, but not in your medical bill? The answer may surprise you. Read.... “Why Your Health Care Is so Darn Expensive.”

 


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Fri, 08/03/2012 - 09:01 | Link to Comment Katharotes
Katharotes's picture

"There’s other evidence: while new car and truck sales weren’t great in July at a seasonally adjusted annual rate of 14.09 million units—down from June’s 14.38 million and February’s 14.50 million, the high of the year—they concealed ominous undercurrents.... This specialized pent-up demand obscured a huge problem: GM’s sales dropped 6.4% and Ford’s 3.8%. The two leaders taking a simultaneous turn south!....Another act of rebellion by the inexplicable American consumer"

Just a personal note. Last night I attended the regular weekly used vehicle auction. The selling was hot, people paying USD2500 for a junky 93 Jeep, USD4000 for a "rebuilt" title 05 S10. These are Cash Only sales in a very rural mountain area of the country. On the way home we passed the Big Name dealerships with lots overflowing with new vehicles. The auctioneer warned the used inventory is nearly gone, buy now or regret it. People will *not* buy new just for the privilege of paying interest to the bank or GMAC.

Anybody else notice similar where you are?

Fri, 08/03/2012 - 09:36 | Link to Comment slowimplosion
slowimplosion's picture

I was in the car biz for a time and still have friends doing it.  Since 2008 or so, used car prices have gone crazy.  For a time this guy was buying next to nothing because he didn't think he could turn them for a profit at those prices.

 

But turn them they are, at the dealer auctions everyone there is in the same game, buy a car, fix it up and sell it and when prices go up like that at the auction they are going up like that at retail also, by definition.

Fri, 08/03/2012 - 09:23 | Link to Comment Disenchanted
Disenchanted's picture

 

 

There are many empty lots growing weeds that used to be "Big Name dealerships" in my region of the world(midwest USA).

That's what I've noticed most.

Fri, 08/03/2012 - 08:44 | Link to Comment Whoa Dammit
Whoa Dammit's picture

I wouldn't say that the American consumer is rebelling. The American consumer has been ridden into the ground, like a horse in a cowboy movie that has been made to run too far and too fast, by too low corporate wages combined with too high costs for necessities. 

I am very skeptical about the so called higher savings rate that TPTB keep touting. Most people do not have anything left over to save after paying bills. 

Fri, 08/03/2012 - 08:40 | Link to Comment slowimplosion
slowimplosion's picture

I find it funny, even though I occassionally do it also, when people say "Americans think this" or "Americans don't care about that" or "Americans aren't going to do that".

Which Americans?

I agree with you.  4 years ago most Americans thought this was their father's recession and it would be over in 12-18 months just like the good academics said. 

A couple of years later some people started peeling off.  They realized this was not the case.  Then another year passes and more people peel off, they realize we have a real intractable problem.  Today, even more are peeling off.

Sure, there are maybe 50% or so of Americans that haven't noticed ZIRP, haven't noticed worldwide sea of debt, but every month that passes more of the other 50% realize that this is not a simple problem that is going away soon and they are preparing for it.

Me, I started preparing in 2006 and am as set up as I'm going to be.  I've actually been spending more money at the consumer level in the last couple of years than ever before getting the tools equipment and homestead I want.  But
I'm almost done and I will be joining those who decide they are not buying anything they don't really need very soon.

Fri, 08/03/2012 - 07:58 | Link to Comment Hannibal
Hannibal's picture

Braindead citizen will continue to swipe their cards to make their "dream" come true.

Fri, 08/03/2012 - 06:32 | Link to Comment Disenchanted
Disenchanted's picture

 

 

I could buy more things than I am, but I'm not...on purpose.

 

I get only what I need...and this is a conscious decision I made(and started to carry out) around late 2001. My internet connection is probably my only remaining luxury...because I know it's not really a need.

I switched from banks to the local credit union.

I cut up and canceled all credit cards(only have a debit card from the credit union). I mostly use cash though.

The only debt I have left is on my home, which I thought about paying down early, but with all the troubles with clean title if you refinanced(I did twice before I knew better) I've read about here and elsewhere I decided not to pursue that. I should have a title search done but I'm concerned that I may not like the results. I guess in eight years I'll find out for sure.

I drive a sixteen year old sedan.

I buy as much of my food as I can from local farmers/farmer's markets. For other things - garage sales, flea markets, etc..

I don't concern myself with 'stacking' any sort of illusionary wealth. I don't even care about trying to be 'wealthy.'

I don't concern myself with having the latest gadgets(i-pod, i-phone, smart phones, latest most powerful computer, etc.)

I don't patronize FB, twitter, Google(canceled all Google accounts, GMail, youtube, etc.) or any other of the latest social fads.

I don't join any groups, causes, klans, and militias nor do I any longer identify with any 'side' of the current political scene('right' 'left' (R) (D), etc.). This goes double for any form of religion...I can no longer identify with any of it.

I do still hold a job with a large corporation, but I have consciously chose a work schedule choice that effectively cut my income in half, meaning I pay the least tax as possible into this system which I now despise. Btw I'm just as loyal to this corporation as they are to me.

 

I'm sure that there's other things I've done in this vein that I'll think of later, but all in all it's been great being a lone wolf...if at times you don't mind feeling like a leper. ;p My family think I'm batshit crazy, and I really don't give a fuck. I think they're waiting for me to move to a cabin in Idaho to write a manifesto...lol!

 

I guess all this would/could define me as being "un-American," so be it...and if no one gives a shit about my testimonial, that's great too.

 

Just an attempt at being explicable about my own personal form of rebelling.

Fri, 08/03/2012 - 04:00 | Link to Comment swamp
swamp's picture

You've adopted 'their' vocabulary by using the term 'disposable income'. Tossed into the garbage? DISCRETIONARY income maybe, but disposable income is just how TPTB want us to see the income 'they' leave us with after living expenses.

Fri, 08/03/2012 - 03:48 | Link to Comment silverdragon
silverdragon's picture

Starve the beast is the best strategy.

Fri, 08/03/2012 - 06:02 | Link to Comment AnAnonymous
AnAnonymous's picture

Starvation might be a good strategy when you are not bound to the being starved.

For US citizens, starving the beast includes starving themselves. The beast is part of them, the beast is within them.

It turns into a delicate operation. And for US citizens, it sounds like the beast is going to starve last.

Fri, 08/03/2012 - 08:56 | Link to Comment CH1
CH1's picture

The beast is part of them, the beast is within them.

I guess you're describing yourself.

You are NOT describing me or many of my friends.

Fri, 08/03/2012 - 07:20 | Link to Comment MillionDollarBoner_
MillionDollarBoner_'s picture

There is no escape from the lion pen.

Would you rather the lions were on a "starvation" day?

Or that they had full stomachs?

Fri, 08/03/2012 - 07:23 | Link to Comment MillionDollarBoner_
MillionDollarBoner_'s picture

"Should five per cent appear too small
Be thankful I don't take it all
'Cause I'm the taxman, yeah I'm the taxman"

George Harrison

Fri, 08/03/2012 - 12:08 | Link to Comment akak
akak's picture

"Should a roadside crap make me appear a hog
Be thankful I don't eat your dog
'Cause I'm the Chinaman, yeah I'm the Chinaman"

-AnAnonymousAsshole

Fri, 08/03/2012 - 03:38 | Link to Comment AnAnonymous
AnAnonymous's picture

It's been announced many, many times by this US citizen contributor that the 'American' consumer will stop consuming.

Many times off.

The reality is plain: the 'American' consumer will stop consuming where there is nothing left to consume.

The limitations will come from the exterior, not from inside.

'Americans' are unable to govern themselves.

'Americans' are the way to be.

'Americanism' is the way of the future.

Fri, 08/03/2012 - 07:15 | Link to Comment michigan independant
michigan independant's picture

Did you get a smoke break from Tibetan nun target practise? Since this one is rather articulate did you red market the other annon's liver for the party directorate needs?

Fri, 08/03/2012 - 08:02 | Link to Comment AnAnonymous
AnAnonymous's picture

I have no break.

I've joined the elite program: the 'American' program.

This program makes all the others feel like holiday.

Reminder: when it comes to extorting the weak, farming the poor, nobody is as able as US citizens.

Fri, 08/03/2012 - 12:11 | Link to Comment akak
akak's picture

When, oh when, oh triple when are you going to stop throating your bigoted ideas, wording your prejudiced mind, blobbing-up your anti-American hate, and finally stop monolizing the speaching means?  One can only take so much time-traveling US Easter Island Lemurian Citizenism!

Fri, 08/03/2012 - 05:21 | Link to Comment WTFx10
WTFx10's picture

STFU

Fri, 08/03/2012 - 07:24 | Link to Comment MillionDollarBoner_
MillionDollarBoner_'s picture

Puleeeez!

Fri, 08/03/2012 - 02:44 | Link to Comment OutLookingIn
OutLookingIn's picture

The people (consumers) know something is wrong. Its taken four years of hard economic times to convince the average citizen of that! It has instilled another layer of fear, only this fear hits closer to home, then the 'terrorist behind every tree' fear.

They know something is wrong but can't quite put their finger on it. But they are slowly, inexorably, figureing it out, that the system threw them overboard thirty years ago and does not give a fuck about them! The discussions around the kitchen table grow ever more heated. Decisions are being made.

The system along with the elites and the TBTF's are not going to like these decisions. The huge, hulking mass of people that make up the nation are slowly starting to wake up and 'get it.' They don't like it. Not one bit. This huge, hulking mass is beginning to stir. Can you hear the kitchen chairs being pushed back, as they stand up?

Next comes motion. In which direction is this pent up anger going to be aimed? Stay tuned. Won't be pretty!     

Fri, 08/03/2012 - 07:25 | Link to Comment MillionDollarBoner_
MillionDollarBoner_'s picture

"Were gonna need a bigger box" of Red Pills...

Fri, 08/03/2012 - 07:05 | Link to Comment northerngirl
northerngirl's picture

I don't think most American's care.  Would you if you are getting free or subsidized food, housing, medical, day care, education, cell phone, etc, etc,etc., from the government or better yet work for the government,(Federal, State, County, City)?  Sad to say, but the majority of the country is dependent on the government in one form or another.

Fri, 08/03/2012 - 09:11 | Link to Comment clawsthatscratch
clawsthatscratch's picture

i disagree respectfully....there will always be a segment of society that will do as you say, but "most" are just stewing in ever growing disenchantment and anger.

Fri, 08/03/2012 - 00:32 | Link to Comment Pejorative Requiem
Pejorative Requiem's picture

Courageous? To refrain from spending is courageous........... gods forbid that the motive is a perilously small spending pool. Naw, let's just believe that the average consumer is hip deep in savings, and only virtue constrains him.

Thu, 08/02/2012 - 23:59 | Link to Comment GOLDTEETHSILVER...
GOLDTEETHSILVERFILLINGS's picture

Follow the yellow brick road...

Thu, 08/02/2012 - 23:25 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Been saying this for years. I am willing to talk about a "fair tax" when we have "fair inflation".

Thu, 08/02/2012 - 23:09 | Link to Comment Atlantis Consigliore
Atlantis Consigliore's picture

Capital and Consumer Strike:  Kills demand economy 1099 all employees by 25 Million small businesses with shut downs will shut down the FED

and the economy in time for Nov;  a Crises and a collapse is a terrible thing to waste.

 

what goes around comes around,  All Capital on strikel  gold, diamonds,   let RE sink with the nar...

Thu, 08/02/2012 - 23:07 | Link to Comment kedi
kedi's picture

"blame “the economic turmoil in Europe.”" Yeah right. The average consumer is always carefully analyzing their up to the minute knowledge of world economic data and meticulous budget regime before making a purchase. More likely most of them can't get any more credit cards to juggle. During my laid off period I put in a few months at a cash register. People buying a can of pop with a credit card and having it declined, then searching through the stack for one that would work. Carrying around a stack of barely there cards and still using them for crap. Bring a bottle of water from home folks, you are more than broke.

I lucked out and got back to work in my field. A year and a half doing low pay jobs. I got thrifty real fast. Managed to not default on my underwater mortgage, but it was tight. Now back to making my wage from 2 years ago. Bills paid up to date. But the house is emptier. Three years of work, worry and losing things to just get back to less but not backsliding anymore. I'm kind of used to that throughout my life, but on my terms, my decisions. A lot of people never faced it. Can't face it. Long term broke is a concept they never had to deal with. Going backwards isn't an option to them.

Long term broke is a concept this generation of the economy never had to deal with. Can't face it. Juggling barely there schemes. Buying crap. Refusing to go backwards, which could lead to a path forward.

Fri, 08/03/2012 - 00:09 | Link to Comment QQQBall
QQQBall's picture

I will get junked for this, but I have read "Your money or Your Life" and "Cashing in on the American Dream, How to retire at 35"... They are psuedo philiosphy books. No magic fixes, you just decide how much "enough" is and stopworking to support stuff. My biz is always pretty strong, although fees are not as high as I would like, but even so I live so far below my means it is not funny.  Getting dry humped pretty good on savings by financial repression though - but even so, once you are debt free and can live on very little, life is simple.

Thu, 08/02/2012 - 22:45 | Link to Comment DeFeralCat
DeFeralCat's picture

I am stocking up on cans of corn. I started with Del Monte creamed corn but have moved to the Shop Rite regular. I figure that I can sell them to ethanol producers a year for now double what I pay for them. They make nice furniture and storage units in the mean time.

Fri, 08/03/2012 - 01:44 | Link to Comment monogratis
monogratis's picture

They'll make great ammo in your water balloon launcher too.

Thu, 08/02/2012 - 22:20 | Link to Comment booboo
booboo's picture

peanuts+food processor, peanut butter. Whalla!

Fri, 08/03/2012 - 01:12 | Link to Comment groundedkiwi
groundedkiwi's picture

you will need electricity for that processor.

Thu, 08/02/2012 - 23:36 | Link to Comment Hotel Romeo
Hotel Romeo's picture

I think that you mean "Voila!"

 

Thu, 08/02/2012 - 23:21 | Link to Comment mkhs
mkhs's picture

Yeah, but have you checked the price of peanuts, lately? It's no longer peanuts-well, it is, but...

Thu, 08/02/2012 - 21:58 | Link to Comment boiltherich
boiltherich's picture

I can't speak for anyone else but in my case staying home and not buying stuff is not a matter of rebellion, it is a matter of vast unreported inflation that has diminished my buying power by at least 30% in the last three years or so. Add on the punitive FICO scoring for having returned the keys for my house to Chase and no matter what my income I can't buy anything on credit, so all I buy is what I can pay cash for. I, a single guy, was doing fine in 2007 on about $3,575 per month (tax exempt) and we did get a COLA announced in 2008 for calendar 2009, but then not a single raise till this January when we got 3% because according to the Fed and BLS there has been almost no inflation since 2008. Food and energy are up by at least 40%, and the general cost of living is at least 30% higher than it was then, result has to be total inability to buy as many units of goods. And when one can't get expanded credit or new credit you have no choice but to pay down old revolving credit as a safety net in case you need those cards in an emergency.

And Cabreado above is right, it is scary, but I am almost more scared to hang onto cash more than anything else because if you sock it away for a month you might find it buys noticeably less next month.

Anecdote: I tossed a jar of peanut butter the other day because the date on it was April 2011. Looked and smelled fine but I thought I would just buy a new jar. $7.68 for a fucking jar of peanut butter? That does indeed scare me.

Fri, 08/03/2012 - 09:32 | Link to Comment clawsthatscratch
clawsthatscratch's picture

Most of those expiration dates are in rare exceptions, not to be concerned about. They are mostly CYA for the companies that make them and sometimes in the case of medicine, an incentive for you to buy more :)  ...The army did a study of the medicines, they really dont't expire, not for at least 15 years, and even in that, it was just more CYA by the army in this case, the exception being antibiotices. Canned food, will last a very long time, decades, it will change color, maybe lose vitamins, but still be edible. 

Fri, 08/03/2012 - 01:46 | Link to Comment Offthebeach
Offthebeach's picture

I used to eat C-ration peanut butter in cans with manufactured dates 15 years old. No probb. ...errrrr....arughgggg.......__

Fri, 08/03/2012 - 01:06 | Link to Comment DC Exile
DC Exile's picture

I would've eaten the peanut butter you tossed. I buy most my food in the 50% off bin located in the back of most stores and in certain sections of the meat and dairy cases. I buy bacon for a $1.99 a pound, pork & chicken $1.50 or less per pound. Organic eggs under $2 a dozen. Hummous, cheese etc all 50% off. I've been doing this for a couple years now -- and noone's gotten sick once even though the food is technically expired. Recently some of the stores -- Safeway -- have lessened the discount to 30% and shortened the window in which they mark it down to 50% - I guess there's more competition for the discounted items. And because I'm a foodie, I even check in Williams Sonoma - the elite cuisine store - on a regular basis. Picked up several cans of Illy Italian roast for about $3.00 a can last time -- regulary $15! Grabbed some jars McClure Brooklyn Pickles $5. And Momofuku Clay Pot Cooking Sauce ($6 regularly $17.00!) to saute our discounted Safeway pork in. I've also made friends with the local restaurant wholesale meat supplier -- US Kobe beef sirloin cheaper than Safeway rotgut beef! Bought some Uruguayan grass-fed flank last week -- $8 lb. Went great with the Malbec I grabbed from the Fred Meyer wine discount section. We're modern-day gleaners with caviar tastes.

Thu, 08/02/2012 - 21:55 | Link to Comment PatientZero
PatientZero's picture

I'm not buying bullshit anymore. Necessities, gold, silver and preps only. Fuck this system. The sooner it collapses the better. Then --and only then--will we have real change.

Thu, 08/02/2012 - 21:45 | Link to Comment Cabreado
Cabreado's picture

The American Consumer is not rebelling (at least by my definition of "rebelling")

The American Consumer is either a) broke and/or b) scared

Both are important; the "rebelling" comes later.

Fri, 08/03/2012 - 01:07 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

 

 

If "rebelling" is supposed to mean "revolt", forget it, won't happen, not here in America, not the American sheeple, no way.

What WILL happen is a slow slide to poverty as the currency is debased way faster (and prices for every needed product and service rise way faster) than wages rise.

In other words, the middle class is steadily falling further behind financially, and it will get worse as the currency is further debased.

USD has lost 99% of its original value, losing half its value in the last 4 years, from 98% to 99%.

That last 1% is gonna be a bitch.

Fri, 08/03/2012 - 08:45 | Link to Comment Debt-Is-Not-Money
Debt-Is-Not-Money's picture

"and it will get worse as the currency is further debased."

I hate to say this but our currency was completely de-based by the Nixon administration and cannot be de-based any further.

All "they" can do now is de-value however, how can something that has no value be de-valued?

This makes my head hurt...

Thu, 08/02/2012 - 23:35 | Link to Comment Freddie
Freddie's picture

If they were smart they would pull the plug on TV which is run by the elites to brainwash the idiots.  Americans and Europeans gave away their liberty and freedom for a clicker and ball games.

Thu, 08/02/2012 - 21:49 | Link to Comment Buck Johnson
Buck Johnson's picture

I totally agree, they are both broke and scared.  They are holding onto whatever good paying job they have like a drowning man holding onto a floatation device.  They sense something bad is coming.

Thu, 08/02/2012 - 21:43 | Link to Comment Vooter
Vooter's picture

I absolutely LOVE not spending money on anything but necessities, especially when I can use some of the cash I've saved to buy more gold and silver. It's like a nice, swift kick in the balls to the American economy, which makes me endlessly happy. Hopefully my lack of consumerism will help collapse this piggish, murderous, piece-of-shit nation's economic system once and for all.

Thu, 08/02/2012 - 22:50 | Link to Comment RockyRacoon
RockyRacoon's picture

Hoo-rah.  I think that calls for voting for the guy you think will least "help" the economy.  Get this rancid system over the cliff once and for all.

Thu, 08/02/2012 - 21:49 | Link to Comment PatientZero
PatientZero's picture

I like your attitude.

Thu, 08/02/2012 - 21:41 | Link to Comment dunce
dunce's picture

My sister and her husband have all their savings in CDs and always have except for some savings bonds long since cashed. They have had negative returns after inflation for many years now. The official published figures are accounting fiction and the worst is yet to come for the savers who believed in honest money. The banks and the fed have been playing dirty for years and the frauds like LIBOR that 99% of people have no clue about and just as well since it was all a lie anyway. We are heading for a blow up world wide with true suffering and societal breakdown. Stabization, my butt, it iwill come down like the world trade center if the powers that be fail to curb the public sector.

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