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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Fri, 05/30/2014 - 08:52 | 4809031 Headbanger
Fri, 05/30/2014 - 08:55 | 4809047 SoilMyselfRotten
SoilMyselfRotten's picture

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

Fri, 05/30/2014 - 08:56 | 4809052 Headbanger
Headbanger's picture

And heating their homes.

If they still have one, that is.

Fri, 05/30/2014 - 09:02 | 4809062 john39
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!

Fri, 05/30/2014 - 09:23 | 4809126 insanelysane
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Tax refunds fueled the March spending spree.  Don't expect another one till next year.

Fri, 05/30/2014 - 10:16 | 4809266 dontgoforit
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And when the last dollar is spent, there will be wailing and gnashing of teeth!

Fri, 05/30/2014 - 10:20 | 4809286 saveUSsavers
saveUSsavers's picture

Consumer Metrics Institute BLASTS the BEA for lies !

http://www.etfdigest.com/myblog/Consumer-Metrics-Institute-News-May-29-2...

Fri, 05/30/2014 - 08:52 | 4809037 intric8
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Ok, at what point is it obvious to the fed that this recovery is a total sham, and what the HEiL is plan Z?

Fri, 05/30/2014 - 08:57 | 4809053 i_call_you_my_base
i_call_you_my_base's picture

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

Fri, 05/30/2014 - 11:43 | 4809626 The wheels on t...
The wheels on the bus are going to fall off's picture

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

Sat, 05/31/2014 - 14:07 | 4812706 papaclop
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.

Sat, 05/31/2014 - 14:07 | 4812707 papaclop
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.

Fri, 05/30/2014 - 09:08 | 4809081 ejmoosa
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"Fake it til you Make It"  is the new motto of the Federal Reserve Bank,

Fri, 05/30/2014 - 09:31 | 4809143 Smegley Wanxalot
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.

Fri, 05/30/2014 - 23:36 | 4811902 Colonel Klink
Colonel Klink's picture

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

Fri, 05/30/2014 - 10:12 | 4809258 codecode
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"Tweak" the calculations...

Fri, 05/30/2014 - 10:24 | 4809298 RiverRoad
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. 

Fri, 05/30/2014 - 12:31 | 4809702 atomp
atomp's picture

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

Fri, 05/30/2014 - 08:52 | 4809038 JustObserving
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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.

Fri, 05/30/2014 - 08:53 | 4809040 Beam Me Up Scotty
Beam Me Up Scotty's picture

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

Fri, 05/30/2014 - 09:03 | 4809068 Winston Churchill
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Because the real figure is far worse than this.

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

Fri, 05/30/2014 - 23:39 | 4811907 Colonel Klink
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Please tell that to Hitlery, she keep reapplying her lipstick.

Fri, 05/30/2014 - 08:54 | 4809046 papaswamp
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Plenty of free porn and social sites out there. Doesnt cost a dime.

Fri, 05/30/2014 - 09:01 | 4809061 chapaev's ghost
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Include prostitution, online porn sales and illegal drug use. Should push things up a bit.

Fri, 05/30/2014 - 09:05 | 4809075 JustObserving
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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.

http://rt.com/news/162332-sex-drugs-uk-economy/

Fri, 05/30/2014 - 09:42 | 4809158 Atlantis Consigliore
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.

L

Fri, 05/30/2014 - 08:53 | 4809041 papaswamp
papaswamp's picture

Healthcare bubblicious!

Fri, 05/30/2014 - 08:55 | 4809050 valley chick
valley chick's picture

Broke bitchez!

Fri, 05/30/2014 - 08:58 | 4809056 Dr. Engali
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. 

Fri, 05/30/2014 - 09:02 | 4809059 fonzannoon
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.

Fri, 05/30/2014 - 09:04 | 4809070 intric8
intric8's picture

Nudelman's handing out cookies to ukrainians

Fri, 05/30/2014 - 09:37 | 4809161 jbvtme
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

Fri, 05/30/2014 - 13:26 | 4810047 A Cruel Accountant
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I know several people who were doing that to save on the tip. Now they cook at home

Fri, 05/30/2014 - 09:13 | 4809095 chapaev's ghost
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.

Fri, 05/30/2014 - 09:19 | 4809111 CrashisOptimistic
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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.

Fri, 05/30/2014 - 09:22 | 4809121 fonzannoon
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. 

Fri, 05/30/2014 - 09:37 | 4809162 Oldwood
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.

Fri, 05/30/2014 - 10:21 | 4809288 dontgoforit
dontgoforit's picture

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

Fri, 05/30/2014 - 09:22 | 4809124 Winston Churchill
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..

Fri, 05/30/2014 - 10:23 | 4809294 dontgoforit
dontgoforit's picture

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

Fri, 05/30/2014 - 09:50 | 4809195 ElvisDog
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.

Fri, 05/30/2014 - 10:31 | 4809313 RiverRoad
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.

Fri, 05/30/2014 - 09:03 | 4809064 CrashisOptimistic
CrashisOptimistic's picture

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

Fri, 05/30/2014 - 09:03 | 4809065 intric8
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.

Fri, 05/30/2014 - 09:51 | 4809204 RaceToTheBottom
RaceToTheBottom's picture

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

Fri, 05/30/2014 - 10:27 | 4809303 dontgoforit
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.

Fri, 05/30/2014 - 09:04 | 4809071 Oldwood
Oldwood's picture

Probably because their chocolate rations had just been increased.

Fri, 05/30/2014 - 09:07 | 4809076 CrashisOptimistic
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.

Fri, 05/30/2014 - 09:10 | 4809088 Dr. Engali
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.

Fri, 05/30/2014 - 09:14 | 4809098 john39
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...

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