Consumer Spending Anemic as 58% Say Economy “Getting Worse”
I have written over and over again on how distorted the U.S. business sales and inventory figures are. Manufacturers are stockpiling products. Retailers are experiencing a decline in sales. Consumer spending is getting softer. But it’s more than just retail that is becoming a drag on the U.S. economy.
Statistics from the U.S. housing market also point to very soft consumer spending.
In July, the annual rate of new home sales in the U.S. economy came in at 507,000 units—a five-percent increase from 481,000 annualized units a year in June. (Source: U.S. Census Bureau, August 25, 2015.) Mainstream media looked at this and called it an “improving” housing market.
But the reality is the long-term average of new home sales since 1963 is 655,000 units. In other words, new homes sales in the U.S. economy are still running 22% below the historical average. (Source: Federal Reserve Bank of St. Louis, last accessed August 25, 2015.) And please keep in mind: our population in 1963 was a lot less than it is today.
Increased activity in the housing market is a critical indicator of consumer spending. When more new homes are sold, one can make the assumption that the homeowners will be buying things needed to run households—be they furniture, appliances, and so on. But new home sales are still way down compared to historical averages.
Consumer Confidence Getting Weaker
And consumer confidence is plummeting. According to Gallup, for the week ended August 23, 58% of Americans now say conditions are “getting worse,” the most pessimistic view of the economy since July of 2014. (Source: Gallup Inc., August 25, 2015.)
With the Dow Jones Industrial Average now down 6.6% for the year along with news of China’s very weak economy hitting the mainstream, the confidence level of American consumers is being affected. And this results in weaker consumer spending. Even if consumers are not invested in the stock market, the daily negative news about the financial markets creates fear, not optimism.
Consumer spending makes up two-thirds of U.S. gross domestic product. And with consumers putting the brakes on spending, you can see why I’m so concerned about the U.S. economy for the remainder of 2015 and well into 2016.