What's Behind Consumer Spending?

We tend to like CNBC's Rick Santelli. More often than not, we tend to agree with him. Of course liking and agreeing are different things, but that's not the point. The point is that Santelli said this a few minutes ago, when the Commerce Department released its latest data on consumer spending:

Americans may have a lot of faults, but we're pretty darn good consumers, and we defy some of the naysayers, even with the commodity bubbles that are going on. Shouldn't call them bubbles, just higher commodity prices in general.

No one can be surprised that American consumers continue soldiering on. We're a remarkable (and remarkably indebted) species. But here we think Santelli has it more or less upside-down. Consumer spending is up because of high commodity prices, not in spite of them.

A couple weeks ago we passed along a BusinessWeek piece on real consumer spending, the point of which was that spending on things people have to buy is going up, and spending on things people want to buy (with the notable exception of televisions!) is going down. And this morning, Bloomberg's Shobhana Chandra got it right (emphasis added in bold):

U.S. consumer spending rose in March, reflecting an increase in prices that is eroding Americans' buying power.

Now how hard was that?

Sources

Shobhana Chandra, "U.S. Consumer Spending Rose 0.4% in March; Core Prices Up 0.2%," Bloomberg, May 1, 2008

Michael Mandel, "The Consumer Spending Mirage," BusinessWeek, April 9, 2008

Comments

[thesession]

Glad you posted this... cause headlines this morning were quite misleading !

[icandoitdon]

amen.

speaking of statistics, take a look at this by henry bloget:

finance.yahoo.com/tech...=

i'm no fan of henry blodget but his article and the article he references by john crudele of the NY Post are a good read as to the value of government data.

i don't even watch the clowns on cnbc. bloomberg doesn't work in two minute sound bytes and it has a far better collection of analysts instead of the happy talkers that comprise cnbc.

[fatcat]

poster has hit on something important...television are selling because of the high def tech.They are much more expensive than the past models in general.In a tight economy this would tend to subtract money for other purchases.

[triznix]

cnbc is essentially the fox news of financial stuff