The Death of Consumption?

We'll have to wait until the end of October to hear anything officially from the government about what's happening with the economy during the third quarter, but economic growth during July-August-September isn't looking too good at the moment.

Last quarter's real GDP figure of 3.3 percent was driven largely by trade - some 3.1 percentage points were a result of rising exports and falling imports - and, while personal consumption rebounded a bit from prior quarters, it looks like it's about to reverse course in a big way.

This story from Bloomberg fills in the details:

Consumer Spending in U.S. to Stall, Hurting Growth

Sept. 10 (Bloomberg) -- A record spending spree by U.S. consumers will come to an abrupt end this quarter as job losses cause Americans to restrain purchases, a Bloomberg News survey predicts.

Personal spending, the biggest part of the economy, will stall from July to September, three months earlier than predicted last month, according to the median estimate of 49 economists polled from Sept. 2 to Sept. 9. The slump will slow growth to less than half the prior quarter's pace.
...
The job market is sending the surest signal the economy is contracting. Payrolls have shrunk by more than 600,000 workers so far this year and the jobless rate shot up 1.1 percentage points from May to August, the biggest four-month jump in almost 27 years, the Labor Department reported last week.

"There will shortly be a sea change in the consensus economic outlook for early next year, and it won't be an upward revision," said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis, who forecast spending would drop this quarter and next and the economy would shrink in the last three months of 2008. "Too many households are just one job loss away from default and foreclosure."

It's surprising that we haven't had a Recession Probability Update from former Fed Chairman Alan Greenspan lately. Maybe I just missed it.

Comments

[dlaw:]

Palin comes from the most-corrupt Republican state party in America. The very idea that Sarah Palin and John McCain will do anything but the oil companies' bidding is ridiculous on its face.

That "Manhattan Project" stuff is ripped off straight from the DEMOCRAT proposal - the Apollo Alliance.

That a joke - Governor Kill-The-Polar-Bears is going to get us off of oil.

I've never read anything so ridiculous.

2008 Sep 10 09:48 PM

[dlaw:]

apolloalliance.org

2008 Sep 10 09:48 PM

[dlaw:]

Oh, and sorry to the author of the article. It is a great little piece and deserves better comments than a little squabble.

2008 Sep 10 09:49 PM

[2houndz:]

Squabble - That's a good description. It's not even relevant.


I read this same article on Bloomberg and had some of the same thoughts. Mathematically speaking, we must be headed toward serious problems. Joblessness is on the rise, consumer credit on the rise, defaults of all types on the rise, and spending is 70% of our economy... Leaves one scratching his head on how Urban Outfitters and True Religion can be doing so well. Leave your logic at the door - it doesn't apply in this market.

2008 Sep 10 10:02 PM

[Steven Hansen:]

the only reason GDP went up was not because of imports - it was because the GDP import numbers were adjusted 15% down.

seekingalpha.com/artic...

2008 Sep 11 04:09 AM

[notsosmart:]

be very catious about believing gov. figures.the one sure thing about gov. figures-lies. sorry,just an opinion.no charts,graphs or other proof.

2008 Sep 11 10:38 AM

[El Gato:]

Greenspan said, on CNBC (yesterday?), that the probability of recession, in his view, was "more than 50 %".

2008 Sep 11 10:55 AM

[Jason Rines...:]

Greenspan said in May last year the probability of recession created from Housing/Mortgage Securities was 25%. That was when I was tipped off he and other big money players were liquidating there mortgage security positions and I ran very serious economic analysis.

I told friends and colleagues chance of recession was 100% in 2008, chance of Depression by 2011 was 50%. I now say chance of Depression is 100% by 2011.

This is the most interesting non-recession recession I have ever seen! We have already started breaking records for the Great Depression, CDO's and CDS set to implode, 600k reported job losses, declining real wages, banking insvolvent, biggest bailout in history and soon $300 B - $1 T being thrusted onto tax payers. Inflation is already out of control even if the march north has paused for now. Consumers here in the Northeast as a whole don't know how they will be paying heating bills this winter. There will casualties in the older populations as they choose between prescription meds and heat. This is disgusting non-reporting from our government and media. Even Canada and England are being far more truthful to it's citizens to prepare them.

Greenspan should now quietly slink away in my humble opinion, not be arguing 'chance of recession' foolishness any longer. There has never NOT been a recession with 11 months of job losses. Main St. and the consuming American drives Wall St and drags it down. It is inevitable.

America has become a socialist nation of morally corrupt leadership skinning off the prized fur of our nations economic wealth and leaving a rotting husk for the rest of the 300 M citizens. There will be Nuremburg style trials by the time this is all over a few years from now. America will recover, I am a big believer. But all of the talk of is this a recession or not based on manipulated GDP and labor reports is really just a waste of time. I want to know what Washington, specifically Congress is going to do about this economy. A veto pen of Obama or McCain is a side show. I will vote Ron Paul.

2008 Sep 11 12:07 PM

[the social ...:]

The drop in import prices in August, which should continue in September, will greatly reduce reported GDP for the third quarter also. That's right - reduce. The drop in export prices will also reduce GDP, I think.

The markets will probably react positively to a contraction in GDP. It's the old lore, that when the recession is announced, the market looks forward to recovery. Can't see how economic recovery could occur, myself. If it does occur, oil prices will go back up, and kill it.

2008 Sep 11 12:29 PM

[ain't no fo...:]

great one Think Big... ditto here.

2008 Sep 11 01:43 PM

[Jason Rines...:]

Thanks WP Dragon. Best of luck. Let's help out our neighbors and America as best we can as gentlemen.


On Sep 11 01:43 PM wpdragon wrote:

> great one Think Big... ditto here.

2008 Sep 11 03:20 PM

[swaps:]

This from CNBC today. Guy says U. S. is headed for a depression.

I wonder if this was engineered, or just happened.

CNBC.com| 11 Sep 2008 | 09:11 AM ET
The end result of the global economic slowdown may be the U.S. announcing national bankruptcy as the government cannot afford the bailouts that it promised and the market will not bail out the government, Martin Hennecke, senior manager of private clients at Tyche, told CNBC on Thursday.

"We expect a depression in the United States. We expect a depression, very possibly, also in Europe," Hennecke said on "Worldwide Exchange."


The estimated $300 billion cost of the Fannie/Freddie bailout will probably be considered as a loss that the government will have to take, therefore passing it on to taxpayers, he explained

2008 Sep 11 10:25 PM

[neeb??:]

more of that wonderful 'socialist' help for the people who never seem to get any help if they, or you, should mess up. Big business gets the help. The people get the 'moralizing' lectures....

2008 Sep 12 09:36 PM

[StateofConf...:]

Agree, but the USA is far from a socialist nation, unless you mean for business. Socialism takes care of its citizens, health care in Europe is an example (not a perfect one). I wish there were a viable alternative to Obama and McCain. One that would not pander to illegal aliens through some Latino senators and one that will finish the fence on the border. Want to loose more jobs? We have 23 foreign worker visa types now and both candidates want more. Maybe one visa could go to a leader that would authorize open season on Congress. That I would vote for.

2008 Sep 15 11:25 PM