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What Consumer Comeback? Personal Spending Disappoints For Two Out Of Three Months In Q2

Tyler Durden's picture




 

When "justifying" the abysmal Q1 GDP print, one after another economist has scrambled to explain that this number is irrelevant, due to a spending halt during the "harsh winter", following which the US consumer has been spending like mad in Q2, and the PCE, which in Q1 was an abysmal 1.0%, and the worst since 2009, is set for a major rebound. Well, guess what: after last month's huge miss (originally -0.1% now revised to 0.0%, on expectations of a 0.2% rise), the month of May - the second month of Q2 - just showed that US consumer still refuses to spend. In fact, while personal income came in line with expectations in the month of May, rising 0.4%, same as expected, and disposable income in current dollars rising by $56 billion to $12,877 billion, it was spending which missed for the second month in a row and the 4th miss in the past 6 months rising only 0.2%, half the expected 0.4%! This was the fourth spending miss in the past six months.

In fact, what's worse is that while overall spending on PCE was a weakish $18.3 billion, the personal spending on all important services was a paltry $4.1 billion: essentially tied for the lowest since November. Hardly the stuff magic unicorn numbers such as those presented by Markit (how are those post-IPO shares trading anyway?) yesterday would like us to believe.

The breakdown of income and spending in the long-term:

It gets worse. As Bloomberg economist Joseph Brusuelas explains, while inflation-adjusted spending is increasing at 2.4% 3-month annualized pace, May run rate "likely exaggerates" consumer’s true condition, direction of real spending, says Bloomberg economist  Given probability of further increases in food, gasoline prices in June, spending run-rate likely to "soften noticeably." Brusuelas adds that 2Q weakness may spill into 3Q, “further damping prospects for a breakout year in growth.”

Translation: it's bad.

And, of course, the reason for it all, is precisely what we said would lead to a spending halt back in April: the collapse in the savings rate to the lowest since Lehman. We warned that as consumers scramble to rebuild their savings, they will spend far less, something further driven, no pun intended, by surging energy and food costs. To wit:

"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?"

Conveniently, the BEA decided to revise its personal saving rate series, but what it shows is clear - precisely as we predicted it would, the savings rate has been rising steadily since March, when it posted a tiny 4.2%, and is now back to 4.8%, which however is still unchanged from a year ago, and hardly the base that will propel US consumers into the dire spending spree the economy needs in the month of June, the last one of Q2, to hit the magical 4% GDP forecast.

Expect the downward sellside Q2 GDP forecast revisions to begin momentarily.

 

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Thu, 06/26/2014 - 09:09 | 4897244 GetZeeGold
GetZeeGold's picture

 

 

Strange.....cause 29.5 hr/wk jobs pay so well.

 

I've got the new Obamacare.....but with the $4500 deductible....there's no way I can afford to go the doctor. The kicker is I didn't even bother to pay for it.

Thu, 06/26/2014 - 09:15 | 4897272 madcows
madcows's picture

Our family deductible is $5600, and, on top of that we still pay thousands each month for "insurance".  Our annual costs are over $15000 a year for NOTHING.  We don't go to the doctor.  Why have insurance at all.  Just put all the insurance payments into a savings account, and if you get sick and die, at least the kids can have it.

Thu, 06/26/2014 - 09:18 | 4897280 Rainman
Rainman's picture

bbut ... the sheep thought ObamaScare was free !

Thu, 06/26/2014 - 09:26 | 4897313 Oldwood
Oldwood's picture

BBUT...it is free for many of the Obama supporters.

Just not the working stiff trying to pay his bills and get his kids educated. There used to be an escape velocity a person could achieve through education, hard work or just plain luck, that would allow them to escape poverty. It seems big government has also created a much higher gravity force, making that escape velocity much, much greater, such that only the top .1% even have a chance of reaching.

Thu, 06/26/2014 - 11:16 | 4897826 max2205
max2205's picture

UP left to right....quit bitchin bitchzzzs

Thu, 06/26/2014 - 12:18 | 4898162 madcows
madcows's picture

Why am I spending $15000 a year to buy someone else their health care?

Oh, wait, right, Lobbyists and private jets for the insurers.  Well, it's money well spent, I'm sure.  any spending is still spending, and that's the grease that gets the economy rolling.  FORWARD!

Thu, 06/26/2014 - 09:33 | 4897350 Shizzmoney
Shizzmoney's picture

It's less about the hours and more about making less than 26-33k/year (as well as the elimination of benefits, which eats at spending for consumers).

I thought inflation was good?  LOLOLOLOL

I hope the market crashes soon and layoffs happen again.  I need a vacation and look forward to laughing in the face of all of these Wall St apologists who defend the fraudsters.

Thu, 06/26/2014 - 09:49 | 4897428 BandGap
BandGap's picture

I don't hope for anything and prepare for the worst. Every paycheck is a blessing at this point, clearly the deck slowly after a nine month layoff. It is a crazy environment out here.

I have no aspirations of retirement or retirement savings. Just plowing through things and being debt free.

 

 

Thu, 06/26/2014 - 11:03 | 4897772 drendebe10
drendebe10's picture

All this enabled by the corrupt incompetent narcissistic illegal alien muslim sociopathic liar in chief so it can live its celebrity grand imperial golf style. Anyone who thinks its doing a good job is dumber than a box of dried politician turds. 

Thu, 06/26/2014 - 09:06 | 4897247 onewayticket2
onewayticket2's picture

sandbagging going on.....so they can ramp it up just prior to the election.

Thu, 06/26/2014 - 09:21 | 4897291 insanelysane
insanelysane's picture

If things don't pick up, I would expect to see a tax cut just prior to the election.  Maybe cut the soc sec tax in half again.

Thu, 06/26/2014 - 09:34 | 4897358 Shizzmoney
Shizzmoney's picture

Obama raised taxes going into an election (by rolling back the payroll tax cut).  Real estate taxes have also gone up across many states.

They need moar money, and it doesn't matter who the president is.  

Thu, 06/26/2014 - 09:45 | 4897380 onewayticket2
onewayticket2's picture

just wait....

 

you guys think the last downward surge directly before the election (to get the Unempl rate below 8%) was coincidence?  i probably dont trust BLS etc as much as you do.

 

btw.  i think the economy stinks, too.  numbers are not good.  but still, these numbers today will be ancient history to voters in November.  

Thu, 06/26/2014 - 11:18 | 4897848 max2205
max2205's picture

The FSA wsnts MOAR of your money!

 

....................../´¯/) 

....................,/¯../ 

.................../..../ 

............./´¯/'...'/´¯¯`·¸ 

........../'/.../..../......./¨¯\ 

........('(...´...´.... ¯~/'...') 

.........\.................'...../ 

..........''...\.......... _.·´ 

............\..............( 

..............\.............\...

 

 

Thu, 06/26/2014 - 09:06 | 4897248 krispkritter
krispkritter's picture

Spend what?

Thu, 06/26/2014 - 09:10 | 4897261 GetZeeGold
GetZeeGold's picture

 

 

ObamacashTM silly!

Thu, 06/26/2014 - 09:44 | 4897408 zerocash
zerocash's picture

We should have an Obamacoin crypro that loses its value even faster than the dollar.

Thu, 06/26/2014 - 09:06 | 4897252 Cognitive Dissonance
Cognitive Dissonance's picture

What is this fascination with economic numbers we don't believe are truthful to begin with?

Thu, 06/26/2014 - 09:13 | 4897267 knukles
knukles's picture

Our false pride and alter-egos demand means of self-justification for narcissistic self congratulations and reinforcement of the multiple illusions of individual superiority

 

Rather similar to the persistent illusions of past, present and future

Thu, 06/26/2014 - 09:42 | 4897320 Oldwood
Oldwood's picture

We are in crisis and desperate for anything that will give us direction to the life boats. But all it does is add to the chaos

Thu, 06/26/2014 - 09:09 | 4897257 TabakLover
TabakLover's picture

Here we go CORE-WRECK-SHUN, CIT-EEE  CORE-WRECK-SHUN!    Yea team!

Thu, 06/26/2014 - 09:12 | 4897265 Dkizzle49855
Dkizzle49855's picture

I did my spending by buying a Colt 6920 and a big ass safe last weekend at the gun show in Texas.  Forward America!!!

Thu, 06/26/2014 - 09:12 | 4897269 RiskyBidness
RiskyBidness's picture

If you add in all the blow and whores AND illegal immigrant spending, you get the real number.  Which will be out soon! BTFD!

Thu, 06/26/2014 - 09:13 | 4897270 madcows
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"We warned that as consumers scramble to rebuild their savings, they will spend far less.."

Fuck you.  I can't rebuild my savings.  I'm doing all I can to maintain the current savings.

Thu, 06/26/2014 - 09:21 | 4897295 TrumpXVI
TrumpXVI's picture

Yup.

This.

Thu, 06/26/2014 - 09:35 | 4897364 Shizzmoney
Shizzmoney's picture

What's savings?

Thu, 06/26/2014 - 09:30 | 4897331 Oldwood
Oldwood's picture

I don't know many who save anything. I wonder if this "savings" statistic includes everyone's credit limit on their Visa card that has not been exceeded yet. I have one card with a $25k limit that I haven't even got close to yet. I be rich!

Thu, 06/26/2014 - 10:08 | 4897527 ElvisDog
ElvisDog's picture

I suspect that making a payment on your credit card is counted as saving.

Thu, 06/26/2014 - 09:49 | 4897425 Chuck Knoblauch
Chuck Knoblauch's picture

Devaluation is a bitch, isn't it?

You'll never pull ahead.

It was never intended to work that way.

So sorry.

Thu, 06/26/2014 - 09:57 | 4897476 madcows
madcows's picture

It's crushing.

By the way, how's the yips?

Thu, 06/26/2014 - 09:59 | 4897489 fonzannoon
fonzannoon's picture

Careful he gets very upset when you bring that up. I would too if I could not throw it 10 feet.

Thu, 06/26/2014 - 09:16 | 4897275 wmbz
wmbz's picture

"Harsh winter" what total bullshit! Well get ready, winter will be back in about 4-5 months.

Then what? Blame "it" on a hot summer.

F-ing morons.

Thu, 06/26/2014 - 09:18 | 4897279 beegle
beegle's picture

in China, the country's chief auditor found $15.2 billion in loans had been backed by falsified gold transactions, the first official confirmation of illegal activity that has been suspected for years. As Heather Timmons wrote on the issue in Quartz earlier this month, the discovery of wrongdoing could "create a ripple effect of credit squeezes and defaults" in the country.

Thu, 06/26/2014 - 09:31 | 4897342 Oldwood
Oldwood's picture

There is likely back up collateral in the form of property deeds on the moon or Mars. I'm sure it is all just fine and dandy.

Thu, 06/26/2014 - 09:18 | 4897281 flowerguy
flowerguy's picture

Good lord....who are they talking about."

The 1% must be cutting back or out of country

They can't track unemployment...how the hell do they track savers in any meaningful way.

Prices are up, wages are flat, most have saved nothing meaningful for retirement, and at least 20% have no one in the family working.

Anyone who does have savings is getting less than the cost of inflation and are forced to ponder putting into the casino called the free markets

Let's see those charts!

Oops sorry...just realized boobburg was combined with the word economist as the source

Thu, 06/26/2014 - 09:22 | 4897302 Spungo
Spungo's picture

You mean people spend less during periods of high economic uncertainty, such as whether or not they will have a job in 6 months, and what the cost of food and utilities will be in 6 months? People start saving their money in preparation? Shocking.

Thu, 06/26/2014 - 09:34 | 4897352 Oldwood
Oldwood's picture

personal spending is not that much different than the stock market. When facing the top and almost certain collapse, what else is there to do but run up the credit cards prior to default?

Thu, 06/26/2014 - 10:48 | 4897717 El Vaquero
El Vaquero's picture

If I could time the big crash, I would go out, get as many credit cards as I can and max them out on useful shit.  Fuck the bankers. 

Thu, 06/26/2014 - 09:26 | 4897319 kowalli
kowalli's picture

Spend more for less - new american slogan

Thu, 06/26/2014 - 09:32 | 4897349 praps
praps's picture

"Expect the downward sellside Q2 GDP forecast revisions to begin momentarily."

 

http://headlines.ransquawk.com/headlines/barclays-lowers-their-us-q2-gdp...

Thu, 06/26/2014 - 09:45 | 4897410 Farqued Up
Farqued Up's picture

Imagine for a moment, what would be ZHer's stance if we were absolutely sure the USA were sitting on (or close to it) a technology that would make fossil fuels obsolete as an energy source? How would that play into the export of energy vs. the USD reserve currency? With ultra cheap energy, oil and gas wouldn't even be required for petrochemical feedstocks. The "POISONOUS" CO2 contains all of the carbon needed, hide and watch graphene take off, for just one example.

I believe it's close to happening, needs a trigger to set it off, but as of now the elites are using the whole scenario to fleece the flock. Do I believe this tale enough to put money on it? No, not a lot of loot, but I do think that there are things in the works that we have no idea as to how they even work. I didn't think this 5 years ago, but I do now and it will shake the world system into a new economic dynamic. A lot of elites will have to move over for the new Big Dogs on the block. The computer age is only a microcosm of changes to come, IMO.

This forum is filled with bright souls, so let "what if" come in for a short while and expound.

 

 

Thu, 06/26/2014 - 10:12 | 4897547 ElvisDog
ElvisDog's picture

Homework assignment for you: Research "The 2nd Law of Thermodynamics" and then get back to me on this wonderous and previously unimagined energy source. But, hey, why always be a skeptic. Care to expand (i.e. provide any actual details) on this new technology.

Thu, 06/26/2014 - 11:01 | 4897763 El Vaquero
El Vaquero's picture

Cobalt-ferrous ceramics used to break down CO2 are being developed at Sandia National Labs.  Once you have that, you need a source of energy and hydrogen and you can start manufacturing liquid fuels and other long, complex chains of hydrocarbons.  We have a ton of nuclear waste that we don't know what to do with that has a lot of fissionable materials.  Back in the late 60s/early 70s, the thorium fuel cycle was proven to work given fissionable material.  The fact that TH232 is fissionable but not fertile means that the physics limitation is the availability of fissionable material.  In other words, our nuclear waste can be used to jumpstart the process, while simultaneously burning up the trans-uranic waste that we don't know what to do with. 

 

This can be done, but I don't see it working for 7 billion people, and even if that weren't an issue, we should have been putting our effort into developing this technology a couple of decades ago and we should have been putting in the infrastructure at least a decade ago.  I still strongly suspect that, even with this, economies would have to be much more local. 

Thu, 06/26/2014 - 11:17 | 4897838 ElvisDog
ElvisDog's picture

Thorium fission is a viable new energy source .... but how do you overcome the "nuclear" stigma so beloved by progressives in the U.S? Barring an executive order by Obama, I don't see how you can get through the legal hurdles to actually build one.

Thu, 06/26/2014 - 11:25 | 4897885 El Vaquero
El Vaquero's picture

You wait until people are worried about being able to afford to run their refrigerators and air conditioners.  They will have to feel more pain before they change their minds, and then the nay-sayers will be told to fuck off.  We need a complete reset in just about everything, and the problem is, that means a lot of pain, suffering and ultimately death.  Like I say, I don't see this working for 7 billion people.  Even developing this technology and putting it to use doesn't take into account other environment constraints, such as fresh water.  We will be forced to change the way we live.  

Thu, 06/26/2014 - 10:56 | 4897751 edifice
edifice's picture

What, like that really bad Keanu Reeves movie, about "cold fusion"? What was it called, Chain Reaction I think?

 

"Whoooaaahhh, duuuude, this willl like, totally change the world, and stuff..."

Thu, 06/26/2014 - 09:46 | 4897414 Chuck Knoblauch
Chuck Knoblauch's picture

Last night, Scarface Gretta on FOX said consumer spending was strong.

Maybe in her salary range spending is very strong.

Too bad it doesn't support growth.

Could always change how GDP is calculated.

In addition to the inflation deflator.

Create an elite inflator.

Thu, 06/26/2014 - 09:55 | 4897465 JRobby
JRobby's picture

Shaming the broke back into spending? That only works with the greenspan faucet wide open.

Thu, 06/26/2014 - 11:43 | 4897985 edifice
edifice's picture

My savings plan is simple: 20% of each check goes into a savings account that I do not touch. As my pay increases, so does my savings. If I have anything extra, I'll buy a little gold here and there, fractional Eagles, mostly. Employer takes a bit out each check for 401k Tax... er... Contribution.

Thu, 06/26/2014 - 12:53 | 4898333 orangegeek
orangegeek's picture

they are hanging onto every last thread to substantiate "nothing wrong here" and "here we grow again"

 

reminds me of some of the IRS investigation - IRS head Hoskinen contradicting what he said one sentence ago more than once without regard of what he did

 

Q1 was the 17th shittiest fucking quarter in US history.  And Q2 is supposed to rebound?  Brutal.

Thu, 06/26/2014 - 13:31 | 4898508 Chuck Knoblauch
Chuck Knoblauch's picture

How can GDP increase if the consumer isn't spending money?

HERE COMES THE GOVERNMENT TO THE RESCUE!

UNCLE SAM WILL GLADLY PAY ANY PRICE!

NO PRICE IS TOO UNREASONABLE!

WE ARE THE CUSTOMER OF LAST RESORT!

WE DON'T MIND SPENDING OTHER PEOPLE'S MONEY!

U.S. Taxpayer = Jackasses (look in the mirror).

Thu, 06/26/2014 - 13:39 | 4898553 Village-idiot
Village-idiot's picture

Yet another example of statistics and charts that are used to lie!

.

That difference between earnings and what is spent is "assumed" to be savings. Wrong! That difference also includes paying down debts (which is not considered to be spending).

The initial purchase put on your credit-card is the "purchase" for GDP purposes. The subsequent payments on the credit-card are considered to be "savings". Consumers are actually paying down their debts. People are finally clueing-in to the inevitable rise in interest-rates coming in the near future. This renews my faith in the average consumer.

Now, if people would just dig up some of that "perfect lawn" and plant a few spuds, we'll all be better off.

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