A Little More Worried Each Day

Today's personal income and consumer spending report adds to my worries.

Note that it's the growth rate of consumer spending that's slowing, not the actual number of dollars spent.  And the chart is adjusted for inflation.

Looks to me like consumers are no longer buoyed by their home price appreciation and mortgage refinancings.  The current growth rate is sustainable--it's roughly in line with growth of disposable income.  But, it's vulnerable if income growth slows, and it's vulnerable if panic sets in as a result of the housing downturn.  I'm still not forecasting recession, but I'm a little more worried each day.

Business strategy implications:  Keep working on the contingency planning.

Comments

[Gary Smith]

Hi Bill:
It seems to me that 'a little more worried...' is most appropriately titled. It also occurs to me that this data might be more relevant if viewed concurrently with a perspective of (1)National Savings Rate and (2)Gross Net Worth, prefereably by age in decades. Based upon what I have seen published, it does not seem to be 'much of a reach' to believe that the 'Boomer Generation', of which you and I are members, is very far away from a 'holy shit' moment of personal awareness. It occurs to me that when the moment comes, and individuals begin to calculate how they are going to get by on how much, that the national penchant for 'retail spending' on more and more stuff may come to something resembling hard deceleration. IMO, this awareness may well affect both the Boomers and their children. The drums of Sales, Marketing & Advertising Noise can only be beaten so hard before the mechanism begins to be damaged.