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Personal Income And Expenditures Show Consumers Lifeless

You can read about it here: Personal Consumption Weak In July 2013.

Here is some important takeaways from the data:

  • GDP uses inflation adjusted consumption, yet the pundits all continue to concentrate on the headline seasonally adjusted (but not inflation adjusted) numbers. Consumption continues to degrade and is now growing less than 2% (1.7% to be exact) year-over-year.

  • Per capita income is statistically unchanged for the last year. Remember per capita is distorted by the 1% - and the economy is not putting money into the pockets of the consumers to consume. The economy may be growing at 2.5% as measured by GDP, but real disposable income growth is 0.6% year-over-year.
Seasonally and Inflation Adjusted Income Per Capita

So all in all - this paints a dreary picture.

The Econintersect economic forecast for September 2013 improved but still shows the economy barely expanding. The concern is that consumers are spending a historically high amount of their income, and several non-financial indicators are weak.

The ECRI WLI growth index value has been weakly in positive territory for over four months - but in a noticeable improvement trend. The index is indicating the economy six month from today will be slightly better than it is today.

Current ECRI WLI Growth Index

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Initial unemployment claims went from 336,000 (reported last week) to 331,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate.

The real gauge - the 4 week moving average - degraded slightly from 330,500 (reported last week) to 331,250. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.

Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line)

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Bankruptcies this Week: Xtreme Green Products

Data released this week which contained economically intuitive components (forward looking) were:

  • Rail movements growth trend is currently accelerating - except for the 4 week rolling average.
  • Read disposable personal income improved - but growth remains well under expenditures.

All other data released this week either does not have enough historical correlation to the economy to be considered intuitive, or is simply a coincident indicator to the economy.

Weekly Economic Release Scorecard:

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.