What Q2 GDP Surge? After March Spending Spree, Tapped Out Consumers Had Biggest Spending Drop Since 2009

Tyler Durden's picture

Last month, when we noted the massive surge in Personal Spending which was funded entirely by the depletion of personal savings, we said that "since spending was so much higher than income for one more month, at least according to the bean counters, the savings rate tumbled and at 3.8% (down from 4.2% in February), was the second lowest since before the Lehman failure with the only exception of January 2013 after the withholding tax rule changeover. So for all those sellside economists who are praying that the March spending spree, funded mostly from savings, will continue into Q2 (because remember March is in Q1, which as we already know had an abysmal 0.1% GDP growth rate), we have one question: where will the money come from to pay for this ongoing spending spree?" Turns out the answer was... nowhere.

Moments ago the April Personal Income and Spending data was released. And while the Personal Income came in line with expectations at 0.3%, down from 0.5%, it was the Spending that posted its first contraction since April 2013, dropping at a -0.1% pace, missing expectations of a 0.2% increase (the biggest since January 2010), and a collapse from the March Personal Spending bonanza which was revised upward to +1.0%.

In short, this was the biggest monthly drop in real consumer spending since September 2009!

 It is also simple math, because when your saving rate tumbles (on a revised basis) to the lowest since Lehman, there simply is no money to spend.

The full history of US personal disposable income and spending:

The good news: the savings rate did finally post a modest rebound, from 3.6% - the lowest since Lehman - to 4.0%. Which is still the second lowest number since 2008!


Bottom line: today's spending number was good for the final revision of Q1 GDP. Sadly, it was s very bad for Q2 GDP and for so-called economic momentum. Expect to see a slew of downward GDP revisions from the Penguin crew momentarily.

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SoilMyselfRotten's picture

Small wonder, everybody already spent their money on parkas and mittens

Headbanger's picture

And heating their homes.

If they still have one, that is.

john39's picture

come on now... every economist knows that consumers are just saving up for a blow out Christmas shoping orgy of consumerism.  western culture is saved!

insanelysane's picture

Tax refunds fueled the March spending spree.  Don't expect another one till next year.

dontgoforit's picture

And when the last dollar is spent, there will be wailing and gnashing of teeth!

intric8's picture

Ok, at what point is it obvious to the fed that this recovery is a total sham, and what the HEiL is plan Z?

i_call_you_my_base's picture

Plan Z? There isn't even a plan B.

The wheels on the bus are going to fall off's picture

World War Z is the plan! get with the programme dude

papaclop's picture

Shit is going to hit the fan, just a matter of time. Gold is artificially cheap right now, having been pushed down by defenders of the dollar. With China buying 100 tons per month and India right behind, I don't need to pimp gold, but a lot of you should be buying at these prices. If you aren't you are just missing the boat.

papaclop's picture

Shit is going to hit the fan, just a matter of time. Gold is artificially cheap right now, having been pushed down by defenders of the dollar. With China buying 100 tons per month and India right behind, I don't need to pimp gold, but a lot of you should be buying at these prices. If you aren't you are just missing the boat.

ejmoosa's picture

"Fake it til you Make It"  is the new motto of the Federal Reserve Bank,

Smegley Wanxalot's picture

or "Fake it till you Fail" .... which has been the de facto motto of the USA for so long that these days we mistake failing less for success.

Colonel Klink's picture

If at first you don't succeed, keep on sucking until you do suck seed!

codecode's picture

"Tweak" the calculations...

RiverRoad's picture

The Fed doesn't give a rat's ass about the bad job numbers or the fact that there's no money out there in people's hands.  That's exactly the way they want it:  Better for the bond market that way. 

atomp's picture

plan Z: Get zee gold. (usingk zee gunz)

JustObserving's picture

Can't the US BLS find a way to hedonically adjust personal spending up? Time is money and all the money people spend on social media and porn surely should count as personal spending.

Beam Me Up Scotty's picture

Agree.  They goalseek just about every other statistic, why not this one?

Winston Churchill's picture

Because the real figure is far worse than this.

There is only so much lipstick you can put on a pig.

Colonel Klink's picture

Please tell that to Hitlery, she keep reapplying her lipstick.

papaswamp's picture

Plenty of free porn and social sites out there. Doesnt cost a dime.

chapaev's ghost's picture

Include prostitution, online porn sales and illegal drug use. Should push things up a bit.

JustObserving's picture

UK started doing that yesterday:

Illegal drug sales and prostitution contribute an extra $16.7 billion to the British economy on a yearly basis, according to a new report released Thursday.


Atlantis Consigliore's picture

USA to count congress prostitution and Wash Illegal Drugs sales to GDP:

and Lobbying aka  rent-a-vote aka  lease an "Honorable Senator-Crook Programs". 

Contribution to GDP. $ 100 Billion a year  including lawyers, lobbyists, government workers, mailmen, hookers, prostitutes, staffers, fluffers, and ass lickers.

Realtors not included, put as worthless fluffer class and on extended Disability SS.


papaswamp's picture

Healthcare bubblicious!

Dr. Engali's picture

Interesting experience eating last night. The wife wanted breakfast for dinner so we took the kids to the local IHOP (with their iGadgets) and the meal cost $77 fucking dollars to feed a family of five, but the interesting thing was, we were the only people in the restaraunt from 6:oo until 7:30 when we walked out the door. 

fonzannoon's picture

Doc I have been in a bad habit of going out with the family for meals lately. The bills are ridiculous. It is scary. This is why rising food and energy costs are deflationary and helps explain rates going down. Food etc are necessities and we will consume that no matter what, but it leaves less left over for everything else. The politicians better start handing out some goodies soon to the dying middle class otherwise the great skank will be upon us sooner than expected.

intric8's picture

Nudelman's handing out cookies to ukrainians

jbvtme's picture

i only go to restaurants which serve local produce (so rarely) and get take out. save 20% on tip and the wine is half price at home. plus i am not grazing with the goats and sheep

A Cruel Accountant's picture

I know several people who were doing that to save on the tip. Now they cook at home

chapaev's ghost's picture

You're absolutle right Fonzi- Supply squeeze-caused rises in fixed costs are deflationary. Why do our fellow ZH commenters continue to buy the golden-showers disinformation re incipient inflation?

Gold, physical, real, lumps of heavy, yellow gold, is NOT real wealth. Why not? Because you have to trade the gold for the things you really need to stay alive. If you already have access to the things you really need, you don't need gold. So, access to actual physical resources that sustain life is real wealth. Gold, at best, is the closest approximation of these things.

If you have extended family, arable land, access to water, cattle, and the arms to defend these things, THEN you have real wealth.

CrashisOptimistic's picture

I'm personally not a believer in the "arms to defend your enclave" concept.  Every national guard armory in the country has mortars and if hordes are roaming the countryside, there will be ex national guard with them who want to feed their families too.

Your guns won't stop mortars.

fonzannoon's picture

forget the national guard. They will only sweep in after the 300 million U.S zombie sheeple have shredded each other first. 

Oldwood's picture

So should we surrender our arms now and start lining up for our orders?

I'm not promoting violence but if you think the fear of being shot would not enter the mind of someone, even if they had a mortar, then we do not think alike. Resources and abilities are important, but the will to act is as well. Those who will act based on their chances of winning will likely always defer to those who act upon principle, right or wrong.

dontgoforit's picture

Those who will act on survival instinct will outnumber those who act on chances or principles.

Winston Churchill's picture

Beg to differ.

My grandfather bought several copper mines in the 1930's with gold.

I still have his dairy's from that time.Very hard to read as he switched between German,Italian,

English,Arabic, and Farsi constantly.Some is also in a private code of sorts, and I have no key.

He had plenty of cash as well as gold which did him very well in deflation..

dontgoforit's picture

5 languages and a code?  Smart man.  Genetics bode in your favor for sure.  Chaio.

ElvisDog's picture

If you have extended family, arable land, access to water, cattle, and the arms to defend these things, THEN you have real wealth.

Nazi Germany analogies are tiresome, but what happened to Jews in Europe who had arable land, water, and cattle compared to what happened to Jews who had gold? Who was able to take themselves and their wealth out of Germany (if they realized in time it was time to get out)? Just saying that land, water, and cattle aren't exactly portable and you are hopelessly out-gunned by the Fascist Police State.

RiverRoad's picture

Restaurants like Denny's have been the backbone of this "economy".  If they're going down, look out below.  It's bad enough that Goodwill is eating Walmart's lunch now.

CrashisOptimistic's picture

Good data, Doc.  Little anecdotes like that are meaningful.

intric8's picture

I was one of those people who couldnt afford to eat there doc. I ate my usual ramen and half a banana.

RaceToTheBottom's picture

I may have been outside in the dumpster, doing my daily dinner dive.  Normally I wait closer to closing....

dontgoforit's picture

If it's not buy-one-get-one-free stuff from Publix, we don't buy it (can't afford to and still do the other things we want to do).  Eating out is something we 'used to do' but we don't miss it too much - the wife's cooking is superior to what we can buy out anyway.  And I just love to watch her move in the kitchen - even after 32 years.

Oldwood's picture

Probably because their chocolate rations had just been increased.

CrashisOptimistic's picture

Which reminds me.  A lesser anecdote but one from this past weekend I've been meaning to post.

My local KFC, and maybe all of them, when they do a "meal", have always included two sides and the 17 year old would always ask "is mashed potatoes and cole slaw okay?"  This past weekend the same mumbled question was asked, but it seemed different to me.  I just said yeah, fine.

When I got home, I realized what was different.  There was only mashed potatoes in the meal.  No 2nd side, and it was not an inadvertent.  They changed that question.

Dr. Engali's picture

It's getting pretty obvious at this point that food inflation is accelerating. They can no longer hide it with smaller portions.

john39's picture

drought is stalking the west and south as well...   i heard yesterday that the OK wheat crop is all but lost already...