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Why Bank Of America Is Stumped: Despite "Lower Gas Prices" US Consumer Spending Has Plunged
One just has to laugh while reading the following hilarious attempt to justify the cognitive dissonance by Bank of America's analysts - and everyone else for that matter - who were oh so certain that tumbling (if not any more) gas prices would translate into a "splurge" of spending on non-gas related goods and instead, when looking at their internal data, are seeing something inexplicable.
To be sure, it wasn't just BofA data that has shown a plunge in discretionary spending: the December retail sales report last month courtesy of the government showed precisely the same, even if BofA's analysts - and everyone else - rushed to describe as a "one-off" aberration which would quickly be revised higher.
Well, it won't be. Because while the BLS may seasonally adjusted and revise employment data to make the economy seem far stronger than it really is, when it comes to spending, every dollar leaving one pocket ends up in another pocket, and can thus be traced.
This is how Bank of America explains its total confusion why the US consumer so desperately refuses to follow the "recovery" script.
Getting impatient
All signs point to a robust consumer: job growth has accelerated, with an average of 336,000 jobs created a month over the prior three months, gasoline prices have plunged and interest rates have declined. Consumers are taking notice with sentiment measures climbing higher. According to the University of Michigan survey, consumers have not been this upbeat since January 2004, when the economy was booming. The natural outcome should be for consumers to splurge, hitting the malls and going out to restaurants. But much to our surprise, the data suggest otherwise.
The BAC internal data show little improvement in expenditures in January, even after netting out gasoline and autos. Sales ex-gasoline and autos, on BAC credit and debit cards, was unchanged mom SA and have slowed over the past few months (Chart of the Month). And it is not unique to our data – the Census Bureau painted a weaker picture with the December report (however, as we argue in this note, we think the risk is that core control sales are revised higher on Thursday).
How can we explain this disconnect? It seems that consumers are saving some of the windfall cash from lower gasoline prices, with the personal savings rate increasing to 4.9% in December. Another factor is that our data may be skewed by consumers with credit cards who are not as budget constrained as those who spend predominately with cash. Looking at a breakdown of spending by key sectors, we find a pick-up in sales at home improvement stores, restaurants and grocery stores, but a slowdown in lodging and furniture sales.
And not just Bank of America. Moments ago Wells Fargo admitted the same:
- WELLS FARGO & CO CFO: CONSUMER SAVINGS ON LOWER GASOLINE PRICES NOT TRANSLATING INTO A PROPORTIONAL INCREASE IN SPENDING
And do you know why? Because, as we explained many months ago, not only is there not going to be an increase in discretionary spending, but all the "excess" money will be spent on - you guessed it - undiscretionary Obamcare, i.e., the government's latest tax for the middle class:
The same Obamcare which already led to a surge in GDP in both Q3 and Q4. And sadly for the propaganda-mongers, not even the BEA can triple-count seasonally-adjusted or actual data. That... and $1.1 trillion in student debt certainly doesn't help either.
In other words, expect yet another conspiracy theory to become unconspiracy fact in 5... 4... 3...
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Jacking off the dog to feed the cat
The world has become truly Bizzarro. Economist need to update their models and totally disregard any assumptions pre 2008.
This is what happens when the economy is just too strong. People have too much money in their pocket and don't know what to do with it.
because its all a big fochin LIE!! Its all RIGGED......by u Ponzi Pumping Pricks
Stawks will never fall again! BUY MOAR BITCHEZ!!!
If You Listen Carefully, The Bankers Are Actually Telling Us What Is Going To Happen Next
By Michael Snyder, on February 9th, 2015OH BOY, TIME FOR THE SHEEPLE TO CHECK THEIR 401K
So Boa doesn't know that BLS is all lies?
They are dumbshits to boot
BofA is part of the system. Plebes cannot complain when there is a boot on their necks.
Perhaps this event shows the symbiotic nature of demand side/supply side that the economic hacks either, A) never understood, or B) have been lying about, from their Edewkayshun establishment perch.
The consumer died with Barrys health care. The last nail in the coffin. Bar tenders, maids and the underempolyed do not buy extras or invest. Barry imports disease with the illegals and attempts to destroy business at every opportunity.
Will not end well but soon.
This nightmare will never end because they know alot of us have lost our jobs. 6 million health ins salesmen, and w are not spending ewhat we have unless we have to. Didnt I read 100 milion out of workforce where do these crooks think the money is going to come from to fuel thier economy. But they won let it collapse untill they have bled us totally dried and hopeless. Have saved and prepared and am better of in a collapse I believe but loosing hope that this will even happen
We need to raise minimum wage and extend social benefits to help people pay more taxes.
so den d'gubmant ca' take dat and put it on mah EBT?
Let me be clear, fuck the "MODELS"!!!!
Bring back mark to market motherfuckers or all the bankers and financiers need to provide a refund or RETRIBUTION.
These fucker have, and still have access to hundreds of billions at zero interest!!!!
Fuck em, take their motherfucking heads already, nothing changes otherwise, period.
You don't have to tell me to fuck a model, LoP, although perhaps others could use that advice. Been there, done that, albeit when I was much younger. Lots of fun, highly recommended. Now, however, I'm just an old married fart with grown kids. No more model-fucking for me <sigh>. We can't all be like DSK....
Remove Mark to Fantasy
Force banks to account for houses in foreclosure process
Reinstate Glass-Steagal
Put a minimum of 40 % of the known Crimesters in Banks in Jail (refer back to 1985 if the @sshats forgot how to do so)
Block GS and other Banksters running the government.
...
ahhhh, fuck it, it is all going down in flames...
Eh. I'm an economist. I admit that most mainstream economists don't look beyond the ivory tower.
If they actually spent a day in the real world, or outside of textbooks, the models would be redundant.
I'd say I have probably experienced more things than most academic economists, even ones like Krugman, who are essentially just passive commentators who ply advice on things they have never experienced for a living.
At least when the real economy sucker punches the financial economy, these jackasses just won't have a place in the real world. I don't profess to be all that intelligent, or have a particularly high scholastic aptitude, but unlike said ivory tower "armchair oracles" I've lived more than a day within the real world. Valuable experience which cannot be replaced with all of the Keynesian models in the world.
Dude that maybe the best comment of the year.
They have not paid off their christmas bills yet.
Fucking BOA, think it's all about fast acting turnarounds. No wonder the bankers keep killing themselves. They find out one day how useless they are and how ignorant they've been.
So most people have afew extra bucks in their pocket every week. We are supposed to go on a buying spree of something???
Agreed, Ruffmuff... Those stupid Bank of Asshole fucks should check out said home improvement stores, grocery stores, and other retail establishments and see all of the old people working there (instead of youth). Those old people aren't working there to blow their paychecks on non-essentail consumer goods.
Sometimes I believe these "pundits" have swallowed so much of their own bullshit that they are believing that it's true.
Wow.
Just wow.
Meth prices increasing?
Why are broke ass Americans acting like broke ass Americans? They should be spending money they don't have!
What's the first thing you do when your pants are on fire?
blow myself till it goes out?
Phone my lawyer to sue the guy with the matches.
Unless it's me, in which case I need to sue the guy who manufactured the defective non-fireproof pants.
This is why economics is junk. Human behavior is unpredictable.
Not really. As Obamadoesntcare has taken effect with this year being the first year we really get to see the devastation this legisltative piece of shit will bring, people have to cut back elsewhere. As we see teh effects of Obamanomics where people's real wages have declined along with their purchasing power, this is the natural end result. Frankly, it is all fairly predictable. Individual behavior isn't predictable, but group behavior is.
Except no one can prove, as a whole, that healthcare spending is higher than usually expected.
I am losing my job because of it 3/31
Itt is a nightmare i lmost mine 12/31 no jobs out here period
Ive been out 2 years on Feb1...no jobs anywhere
No Jerb here either, since 2/13. Went from 200k/yr to 0.
what field were u in?
selling health insurance: my guess
maybe d'blacks be likin' it out dey cuz dey ain' no jobs...
"Except no one can prove, as a whole, that healthcare spending is higher than usually expected."
Hey tool, stop the false narrative that healthcare is "no higher then expected". Whatever happened to the promise that 0zer0 and the dumbcrats voted for that said "each family would SAVE $2500 per year on healthcare premiums". Add "you can keep your plan", and "you can keep your doctor" have all been proven false. Plus the fact that hours worked are falling to under 30 hours as people lose their full time jobs with HC benefits that are eliminated for part time jobs. All of this was PREDICTED by the opponents of 0zer0care before it was passed. Now tools like you have to lie to say 0zer0care is just reducing the amount of HC increase because all your other lies have been exposed. Nice try, but the chickens are coming home to roose.
Love all the proofs that healthcare spending has dramatically increased.
I fear that the .gov spindoctors will do a very effective job of obfuscating this fact and duping the dumbed-down public into believing it is the fault of terrorists or the Koch brothers....
Just pay the $95 penalty and then go out and get new shoes.
and some:
Hand Sanitizer
Toothpaste
Vitamins
....and a YMCA membership
The fine for the first year is $95 OR 1% of household income. Which ever is HIGHER. Not just $95. My fine was over $700 this year. I wish it was just $95.
But you saved 5-10 k
Clearly, reality is incorrect.
Look no further than the cost of health ins, mine doubled again to $7200year. Wife gets hers at wrk, pays $200/ month. Friend of mine runs an auto repair shop, said he an his wife's policy went to $18k a year. Who the f**k can afford that, unless you are a member of the Free Shit Army
Probably got an outrageous deductible too.
Just hang on a little longer.
Jeb Bush is going to fix everything, I think.
Jeb Bush on Health Care
http://www.ontheissues.org/2016/Jeb_Bush_Health_Care.htm
... the country needs another Bush or Clinton about as much as it needs another term with the arrogant narcissitic liar in chief fudgepacker.
Nobody will send Ron Paul money, nothing of consequence anyway.
Jeb or Hillary. You are the decider of your vote.
Yes I have been afraid the election is going to go that way. Heads or Tails (your choice/vote) THEY WIN. It is rigged.
I will pick a name from the phone book and write it in before I vote for ANY R or D 'candidate'.
spread the word. vote for anyone but them.
yes I am...and I vote NONE OF THE ABOVE
NOTA, the only ethical choice, EVER!
If the fuckers give me Bush-Clinton as a choice, I WILL vote third party. Whatever other party seems to be running distant third will get my vote.
No, I don't like the Libertarians, or the Pauls. But I would choose them over a Bush or a Clinton, and I'd be voting AGAINST the Dems and Repubs rather than FOR the other guy. THAT is the statement I'd be making with my vote...I REJECT both Dems and Repubs, and will take whatever is next in the queue, whatever it is, before I'd choose either of them.
Of course, there is still time for the surprise, the dark horse, that could be presented by either party...my mind plays with a scenario where Hillary makes a sudden announcement-she won't be running due to Bill's ill health, and someone new and fresh steps up and snatches it away from Biden and the other wanna-bees.
Or something similar happening with the Repubs, and they finally get a conservative who understands you don't HAVE to be a cruel asshole to be a true conservative.
Well, whoever it IS, my fantasy President then marches to the Capitol with supportive crowds, and breaks up the frat-house orgy going on...Cruz and Gomert have torn down the curtains and wrapped them around themselves, toga-like, and are yelling "Follow me, boys!", while members of the Democratic caucus have gotten Boehner in a corner and are kicking the tar out of him...Wasserman-Schultz sits in a corner, crying, with Pelosi standing over her screaming, "Get it together, girl!"...
Then in bursts the MAN (yes, it's a man..) who then proceeds to clean House, and Senate, WITH the full support of the People, who have gotten over their divisions and gotten firmly behind this new leader. And he kicks some ASS, tears that place UP!
Well, it's a nice fantasy...
~"Jeb Bush is going to fix everything, I think."~
WTF are you talking about? In two separate polls, Jeb had less than 5% of the vote. The top 4 leaders were:
Scott Walker ~ 44%
Ted Cruz ~ 13%
Rand Paul ~ 12%
Ben Carson ~ 8%
Even Donald Trump outpolled Jeb by 5k votes, (out of 449k). Nobody wants Jeb except the US Chamber of Commerce, the CFR one-worlder crowd and oligarch capitalists.
https://polldaddy.com/poll/8625087/?view=results&msg=voted
Do you really think America needs another pal of the House of Saud in the White House? What for, so he can go on feeding low-information voters with the "War of Terror" lie? Or maybe he can explain why Common Core is turning America's school kids into village idiots? Is he going to send Lois Lerner to jail? How about Eric Holder? Maybe even (finally), Jon Corzine? Yeah, Jeb is going to "fix" things, is he?
Not too late to join. Added benefit of not having to think.
At some point you gotta ask, "why bother working for Bennie Bux?"
Join the Free Shit Army... its ranks are swelling as more and more honest people realize that honesty and hard work no longer pay off.
I'm getting very close to switching teams myself. Have seen how the other half (FSA) lives and it's really not too bad.
2014 rates - $180 every two weeks
2015 rates - $300 every two weeks
Fuck Obamacare and every Democrat that voted for it.
Let me repeat that.
Fuck Obamacare and every Democrat that voted for it.
With national healthcare, affordable medicine has finally arrived to the poor and middle class. This is a far cry from the standards of just a decade ago. The medicines commonly prescribed to the under privileged are now gaining traction and shedding light into their benefits. Members of the GOP and other conservative right wings are slowly accepting this new reality. Never have Americans been more free to explore the benefits of modern medicine.
Marijuana is now at such high quality levels that prices have come down to stimulate supply. Cancer, Arthritis, Bell's Palsy are just a few of the many conditions this wonder medicine can provide benefits too. Recently, in central California, methamphetamines have been reduced to misdemeanor for possession now raising the possibility of its widespread use as a potential catalyst to enhanced productivity among job candidates and seekers.
This is America that the redskins and rednecks fought for. A place where capitalism has avoided greed and corruption for the greater prosperity of the self interested individual. God bless you all.
Go practice falling down in traffic.
Sodbuster says: Look no further than the cost of health ins, mine doubled again to $7200year. Wife gets hers at wrk, pays $200/ month.
I ask: Why are you not on your wife's insurance plan?
be lookin' like d'bamacare gon' swell d'rank o' da ahmee...
Uhm, nobody has any fucking money. But I'm told the recovery is just around the corner..... corner.... corner.........
Everytime somebody tells me we are in a recovery I ask, "How can this be? Nobody has any money! Everybody is spending borrowed money that nobody has in the first place. If nobody has any money, where is all this money coming from? Why are prices up, while incomes are down?"
Of course this line of questioning is met with either a blank stare, or a reply that the "Bewb Tewb" told them so. Ugh.
Orlov sums things up quite nicely again today. What's fake? What's real? Who knows?
Masters of Parallel Universeshttp://cluborlov.blogspot.com/2015/02/masters-of-parallel-universes.html
(He ranges all over to "Boston Strong", Ukraine, 9/11...)
"our data maybe skewed due to the fact that we are corrupt shysters and the the UMich consumer confidence index is rigged"
How can BOA be stumped? I thought they and all the other banks had the smartest people, knowing better than everyone else.
Has the employer mandate been activated yet? I know they delayed it until after the elections. I guess the individual mandate will irritate many voters also.
Never was about healthcare that is why the deductibles are so high.
Peak debt, dudes. Increase my monthly allowance and I will go out and spend some more. There's already a long backlog of things I'd like to buy, but I'm not going to buy it on credit cards if I can help it. I have enough debt already.
So to recap:
1.) give me a monthly allowance on top of my salary or sit around wondering where all the consumers went. Also think about the corelation between massive industrial off-shoring and low consumer demand. Think about it, think about it. Let me know what you bankists come up with. Were the short term profits worth it? Because we just entered the long term.
bu bu but we are just transitioning to a service economy...and with just the right amount of inflation hair-dressers, waiters, waitresses and bell-hops can be making a six figure income!
I knew I shoulda become a hooker.
Dude, you gotta aim higher than that.
You want to be a PIMP, and have all the hookers give you their money.
Just by the BoA statements...they have no clue what is going on for the majority.
Property Tax almost 4k per year now on my modest home. Up 10% every year. My car is worth 2k so every year I give them the equivilant of 2 cars and they let me live in the house I bought. I'm tapped out.
Not to mention homeowner insurance, Holy FCK.
Unless your house has appreciated by 10% a year, you should definitely challenge that.
Nothing new. Deflation. Dollar rules and one must use dollars for basic needs. Dollars get harder to get with stagnate wages and a weak economy. My position hasn't changed. Still a ways a way from end of the evil dollar fiat. But it will come eventually.
It is because 80% ofAmericans are way undersaved and have not benefitted from Asset inflation - If anything, due to higher stock valuations and lower expected returns - they have fallen behind. Of course most are taking this opportunity to save - though expected returns of down, the expected future cost of retirment has gone up -- that my friend is called inflation (need to spend more money on savings today to consume in the future) and it is a concept the FED does not understand. they are idiots -
It is because 80% ofAmericans are way undersaved and have not benefitted from Asset inflation - If anything, due to higher stock valuations and lower expected returns - they have fallen behind. Of course most are taking this opportunity to save - though expected returns of down, the expected future cost of retirment has gone up -- that my friend is called inflation (need to spend more money on savings today to consume in the future) and it is a concept the FED does not understand. they are idiots -
It is because 80% ofAmericans are way undersaved and have not benefitted from Asset inflation - If anything, due to higher stock valuations and lower expected returns - they have fallen behind. Of course most are taking this opportunity to save - though expected returns of down, the expected future cost of retirment has gone up -- that my friend is called inflation (need to spend more money on savings today to consume in the future) and it is a concept the FED does not understand. they are idiots -
I don't see what the problem is. I'm living large--surf and turf every day. As we speak I'm considering starting one of them "cheese" truck businesses only call it, "Surf and Turf on Wheels." Sardines and Vienna sausages with a side of beenie weenies, all washed down with a orange Crush! Sell it as a combo, only $8.95 to go.
You could also serve crushed Statin tablets on a chocolate sundae for dessert, too.
Fuck all the credit card bastards. I have good credit. I have two credit cards. They are still charging people like me 18 to 25 percent on unpaid balances. So I just paid off the two credit cards, and they can shoot themselves with a nail gun.
You can't outsource good paying manufacturing jobs for 30+ years and think everything will be ok economically.
We are near the end of this failed Reaganomics/ consumerism experiment.
The Fed and their accounting tricks are the only thing keeping Reaganomics alive.
you can't just blame ray-gun. it's the fault of many, many, many assholes. especially those in congress. they're the ones that make the laws and set the budgets. it's like blaming obama and ignoring pelosi/reid. pelosi/reid/boner/mcconnell are the real enemies.
Yep. This has been in the works for centuries actually. It is just 'heading up' now....going be a nasty pop (like that last boil on my ass).
These fuck faces aren't happy unless Americans are up to their eyeballs in debt...otherwise how are they gonna make money?
Debt is control
Those three words sum up the whole of human history.
So, BOA can recognize that gas prices have gone down, but can't recognize that the price of everything else has sky rocketed. Fucking BOA deserves to be out of business. They are fucking retarded. HEY, BOA ASSHOLES!, the fucking price of food, shelter, transportation, education, and HEALTHCARE ARE FUCKING THROUGH THE ROOF! You Fucking Retards. People's wages are stagnant and the cost of living has exploded. That $1000 a year they've saved on gas is peanuts compared to the inflation everywhere else. fuck off and die, assholes.
The roaring recovery led to all this full employment which in turn led to....uh, nevermind
Uhhhh..my extra $15/wk savings @ the pump has gone straight to prop up my booze budget.
All my money is in the "market", why spend it locally on getting an addition on the house, new car, clothes or vacation when I will miss out on the upside. From a guy at work.
Of course not. They're too busy twerking, flerking and jerking!! Duh!
Let me clue you in, BAC - the vast majority of Americans ARE FUCKING TAPPED OUT. They are treated as walking wallets to be opened as often as necessary to transfer assets to the top. I just don't understand the disconnect in this country. ALMOST EVERYONE IS BROKE. For fuck sake in two weeks I have to go register my car. Take a guess what it's going to cost me to register my car in the not-so-great state of CO? Probably around $850 FOR ONE YEAR with it dropping by about $100 the second and third years (of my lease).
That is a couple thousand + that will line pockets that would otherwise pay for ice skating classes, buy more groceries, cushion savings or otherwise be spent in a manner more directly benefitting some small business. They say it's for road improvements. Come drive our amazing roads and try not to break a fucking axle.
Honestly, FUCK THIS PIECE OF SHIT COUNTRY and pretty much everyone in it.....
I think everyone has it wrong. Everybody's just listening to Janet and her idea how everyone can get rich. Shit with the average family saving say $15-20 bucks a week on gasoline they can invest in stocks.
"Just can't imagine why those peons aren't spending that $70 windfall every month"? Come on people get out and spend spend spend buy that 4th TV. Go get some wood pulp down at BK, and after you're done buying all that crap toss in that extra $10 a month into a very diverse mutual fund, so BofA can charge you fees and a percentage every year to "manage" your money. Just remember they're smarter than you.
Those EBT cards don't buy as much as they used to....
No, it isn't Obamacare...as much as some would like to believe that, the fact is that people are NOT SPENDING the way they used to, period. It isn't that their money has to go somewhere else instead...they are choosing NOT to shop. They are paying down debt, and stashing it.
The idea that consumers might actually decide to save must loosen a lot of bowels...good.
Maybe people have just gotten disgusted with the whole thing, and have chosen to stop playing.
The consumer engine isn't idling, it's dead. Just like the retail investor, and the taxpayer. I'll enjoy watching all those revenue-streams to Wall Street and the government start to dry up.
Big Time baby. I spend nothing. On purpose. (OK, I buy a lot of books. I suggest The Creature from Jeckyll Island.)
And I proudly pay no tax, thanks to levered muni funds. Which have done very well, thank you.
MVF. PMF. 6.5% tax free and going higher given inevitable tax increases.
Starve the Beast.
Yes, how many millions are now depression minded? Once burned, twice shy. Kind of like the odd old grandma that re-used the tin foil, or the grandpa that was horrified at the thought of wasting any food at all.
Hope has been lost. Faith is no more.
And maybe a few cut back due to necessity, and now having made some personal recovery haven't ramped spending back up because they found that spending less wasn't so bad.
The American People are angry!
https://www.youtube.com/watch?v=YJsKBEDGH2c#t=113
Consumers not spending?
Americans must be on vacation spening their money overseas.
Ya, that's it.
everyone is saving their savings from cheaper gas, cheaper ipad, etc to someday buy a maserati.
Maybe having a part-time job at minimum wage has something to do with how much a person spends...
well... I can't even!
During the peak of the "crisis", when mortgage-backed securities were selling for 5 or 10 cents on the dollar, why didn't the bondholders or banks offer every homeowner the ability to buy back their mortgage for 15 or 20 cents on the dollar?
Probably because congress forced FASB to suspend mark-to-market.
BofA? Criminals first, everything else a low second. Oh, and fucking scumbags third. Including all their stooge attorneys. You can run...
There is jus couple of solid and not overvalued stocks left on US market. But there hundreds of bubbly ones. Here you can find a valuations of such a stocks:
http://prudentvalueinvestor.blogspot.com/2015/01/sell-short-dexcom-inc-d...
Just a couple, huh?
This is tax refund time. If the lowered energy prices did not have ADA you probably would see a surge this quarter. But when many middle class Americans are getting either no refund becuase of ADA or a bill this leaves less discretionary spending and it is a big hit to confidence in general. In real terms,
ADA is a 2.5% tax in 2015 which perhaps would not hurt confidence much but when insurance premiums double we have a real big problem.
The answer as to the "gas price premium" and money trail is simple from my own family experience. What's happening is, most millenials are up to their eyeballs in loans from family/friends. Any "extra" money they might have now from the lower gas prices is already spoken for. There's not any "extra" money.
The nicest thing that I have seen said about the BofA economic pundits in this thread is that they are clueless.
Community Banker here. We've noticed more people putting money into savings. Nobody and I mean nobody trusts the economy right now that and despite what people think the average person knows or learned the hardway in 2008 that you can't live above your means and so desires a pool of savings to fall back on.
You'd think one of the biggest holders of consumer debt (mortgage, student, cars, credit card) would eventually figure out, after cashing those usurious checks, why consumer spending has "slumped".