This Wasn't Supposed To Happen: Household Spending Expectations Crash

Tyler Durden's picture

One of the biggest drivers of the so-called recovery (in addition to the Fed's $4.5 trillion balance sheet levitating te S&P500 and the offshore bank accounts of 1% of the US population) has been the US consumer: that tireless spending horse who through thick, thin, recession and depression is expected to take his entire paycheck, and then some tacking on a few extra dollars of debt, and spend it on worthless trinkets.

Sure enough, for the past 8 years, said consumer has done just that and with the help of the endless hopium and Kool-Aid dispensed by the administration (who can forget Tim Geithner's August 2010 op-ed "Welcome to the Recovery"), and by the political and financial propaganda media, spent, spent and then spent some more hoping that "this time it will be different."

This all came to a screeching halt earlier today when courtesy of the latest New York Fed Survey of Consumer Expectations, we learned that the US consumer has finally tapped out.  Households reported that they expected to increase their spending by just 3.5% in the next year, a major drop from the 4.3% the month before. This was the lowest reading in series history.

Worse, when adjusting for household inflation expectations, which have been relatively flat if modestly declining around 3%, real spending intentions, when adjusted for inflation, just crashed to a barely positive 0.5%, down over 60% from the prior month. This too was the lowest print in series history.

 

Think America's poor have finally revolted, and refuse to spend any more? Think again: the biggest culprit in the collapse in spending intentions was the middle class (those making between $50 and $100K) but mostly the wealthy, those with incomes over $100K. It was the latter whose spending expectations dropped to, you guessed it, the lowest in series history.

Needless to say, this was not supposed to happen.

Worse, in an economy where 70% of the GDP is in the hands of consumer spending, a collapse in spending intentions to multi-year low levels means just one thing: recession.

The only silver lining is that since the source of this data is the Fed itself, then Yellen will surely be aware of the dramatic shift taking place within the biggest drive of US economic growth. Which is why for all those wondering just what caused today's market surge which was driven not by China's collapsing economy, but by the realization that the Fed will not only not hike in September, but probably won't hike in December, or ever, just look at the first chart above.

Source: NY Fed

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freewolf7's picture

Better have a relevant skill.

Supernova Born's picture

How is this possible?

Folks better rejigger there "expectations" as Blue Cross is seeking 25%+ rate increases across the country courtesy of Zerocare.

Handful of Dust's picture

Paying for more insurance with less access.

 

Bullish!

knukles's picture

Time for a Benchmark Revision and Newly Adjusted Seasonals ... Exactly the kind of crap demanded of surveys.
Don't worry, the shit'll buff out

bob_stl's picture

How the fuck do people know that they expect to spend 3.5% more next year?

Osmium's picture

Correct.  I don't give a shit what they expect to spend, tell me what they spent.  Much more meaningful number.

Headbanger's picture

Yep...  As I said before..

I just put a few hundred bucks into fixing my 13 year old car to save some Summer miles on my 11 year old truck I use in Winter.

I see lots of old trucks (like 25 yearold F-150s) getting fixed up at the shop I go to.

Those old Fords don't rust much either.  The front ends just fall apart after a while.

Fiscal Reality's picture

208,000 on my 2004 ES and 170,000 on the 2000 Corolla. Run 'em till the wheels come off.

Handful of Dust's picture

Has Barry EVER kept any of his promises? I am still waiting for the $3,000 for a Thingamajig he promised.

Stuck on Zero's picture

"in an economy where 70% of the GDP is in the hands of consumer spending..."

There's that oft-quoted totally fraudulent statement again.  Consumer spending amounts to about 30% of the fraudulent GDP numbers.

turnoffthewater's picture

That as the same as what the TPTB have been doing to the ordinary man's labor for a long time. They want all of the the retirement paper money.

max2205's picture

Hey I thought getting taxed to death was spending 

jerry_theking_lawler's picture

Haha, true. My sister ran her 2000 camry until it stopped one day (tranny went out) with 285k miles on it. She was going to sell it for junk but I told her I would help her sell it for parts. Sold it for 1k to a parts/body dealer. Guy said the body was in good shape and he had engine/trans he would put in it and sell for 2.5k minimum. The guy was a car flipper and it worked out for everyone.

zelator's picture

198,000 on my 1992 Toyota Camry

itstippy's picture

"Those old Fords don't rust much either.  The front ends just fall apart after a while."

I know of one shop with one guy that has mastered front end alignments on old Ford Twin I-Beam suspensions.  Even other top-ace-shit Ford mechanics take the old Twin I-Beam Fords to this guy to do the final alignment.  Replace all the worn out parts, make it tight & good-good, then take it to this other guy for the alignment.

If you run cheap second-hand skins it doesn't matter; the tires kinda wear to fit the shitty alignment.  When the cords show too bad you go on Craig's list and find another cheap set.  But if you put decent tires on the old Ford trucks without getting a proper alignment they'll be eaten up very quickly.

TheAnswerIs42's picture

All depends on where you live. In the NorthEast, yeah it'll rust.

You can get a bit more out of them by replacing the brake-lines/exhaust.

But there is a limit.

Down South or the West Coast, not so much.

I'm still driving a 97 F150 and a 2001 Saab (lord, what a magnificent piece of engineering, a joy to drive), but not for much longer.

Mebbe a year or so more, then onto something else.

 

Kprime's picture

My F-150 is damn near new then.  2000 model.  I bought it in 2006 with 19000 miles on it.  I paid 16000.  It will be the last truck I ever own.  Of course I only drive about 1500 miles a year. 

I need Another Beer's picture

Belly laugh HB !! Mine is a 200 f150 with 240000 on it. Runs like a top and still pulls my camper and boat

TrumpXVI's picture

Yup, 182,000+ miles on my '88 F-150.  Wassat?...27 years old and still driven every weekend.  

And my mechanics (who are located drirectly across the street from my house are totally sympathetic....as well as being worth their weight in gold).

Cruel Aid's picture

Sign of pessimism more than how much you are going to actually spend

richiebaby's picture

The scary part is the NY Fed only surveyed Wall St execs households

The central planners's picture

The NSA satellites are reading our minds.

TheRideNeverEnds's picture

Exactly. Besides the facts that it impossible to know for sure and extremely difficult for even companies employing literal teams of people to figure out projections like this a quarter at a time when they can fudge the inputs to goal seek the prediction. This whole index thing is bullshit. I bet the majority of the U.S. population couldn't even tell you what three percent of fifty thousand is without a calculator let alone some percentage of an odd number and I imagine a good many of those would be unable to figure it out given a calculator.

Consuelo's picture

 

Well...   Now that it has been undisputedly proven that one can, in fact, polish turds (Mythbusters), yes indeed, it will buff out.

 

 

Umh's picture

You're maybe the nicest smart ass I know of.

The9thDoctor's picture

This is a no brainer. Monthly rents and monthly mortgage payments are at all time highs. If Joe Blow makes biweekly paychecks, his entire paycheck goes towards rent/mortgage. the other paycheck he has to skate by for the next 28 days on, but that is used towards utilities, transportation, and groceries. Joe Blow is totally tapped out.

If Joe Blow has student loans, forget it, its over. The only growth industry for consumer spending is Dollar Trees. Even Walmart is getting too pricey. What props Walmart up is EBT. Without EBT, Walmart is over.

Osmium's picture

And if Joe Blow doesn't have a house he can use as an ATM machine he will be screwed even faster.

TBT or not TBT's picture

Joe Blow sounds like a loser when you all talk about him like this.

Eternal Complainer's picture

Yes.
Joe Blow is a loser. He'll always be a loser because he's a sucker.
Anybody with a half a clue knows this.

SeattleBruce's picture

Including, for example, if Joe Blow already used his house as a piggy bank leading up to 2008, and basically ended up underwater.

SandiaMan's picture

Blue Cross Blue Shield Threatening to leave New Mexico because rate increase denied.

http://www.kob.com/article/stories/S3874923.shtml?cat=500

 

Supernova Born's picture

Yeah, but in NM Blue Cross only asked for a 51.6% increase.

So there is that...

Billy the Poet's picture

Additional costs must be passed on. Covering pre-existing conditions which cost thousands of dollars or more each month while the insured pays only a fraction of that amount in premiums means that everyone else must pay more. Those who believe that Obama waved a magic wand and made medical care fall from the sky like manna from heaven are sorely mistaken.

Caleb Abell's picture

"Those who believe that Obama waved a magic wand and made medical care fall from the sky like manna from heaven are sorely mistaken."

barry didn't do squat about medical care.  The ACA was written by and for the corporations in that industry, and they designed it so that they could guarantee gigantic profits.  The only thing that barry and the other treasonous scumbags in congress did was say "Yes, Sir" and enacted the ACA. 

 

Cruel Aid's picture

Sorry to those who thought i was serious about greed comment.

For BCBS to leave revenue behind, they would think that they can only lose money or break even going forward.

Have to wait and see if they are negotiating or what

knukles's picture

All part of the plan.  Everything the goobermenit does is to drive the private sector out of business and then assume the void, engaging in practices even worse then that used to fail the private businesses.
To wit:  Student Loans.  Home Mortgages.

Next:  Healthcare.

See, the industrialists always support the intervention and loopholes for themselves until the beast consumes them/itself in their entirety.
The Leviathan Grows Uncontrollably as a Cancer upon the Face of Mankind

Welcome to the New Versailles of the New World Order

dreadnaught's picture

Are you nuts? Health Care Industries are rolling in so much money that they even wipe their asses with it. I dont shed a tear for ANY of the Health Care "suppliers"

Billy the Poet's picture

And yet your trustworthy local doctor has taken early retirement or is scraping by while trying to continue to provide quality care to long term patients. If your doctor keeps written rather that electronic  records as mine does (bypassing intrusive databases to some degree) he's charged an extra fee for that too.

Hugh_Jorgan's picture

If you can call 6-7% profit margins rolling in money...

Kprime's picture

don't forget car loans

MsCreant's picture

Holy shit I did not know about that, just Googled. They already raised my rates about $50 a month. 

You know the .01% is just so worried about this issue...