Consumer spending was reported to have increased .7% for February and was the "fastest" growth in four months. HOWEVER, the news reports never analyzed a breakdown of the source of that "growth." Well, I'm here to report that the "growth" was price inflation, primarily at the gas pump, and that if we had a way to measure "unit" volumn then sales growth on an inflation-adjusted basis would have shown a decline. It's the unit volumn that contributes to real economic growth, not price inflation. I don't have time to dig
up the data to prove my point, but here's a good analysis I did happen to stumble upon on marketwatch.com:It’s no wonder consumers are turning cautious again: After taking higher prices into account, consumers’ purchasing power fell in February. More and more of their income is going to pay to fill up the car and the pantry, expenses that can’t be ignored, leaving them with less to spend on other things. Meanwhile, wages aren’t rising as fast as prices are. LINKThe second piece of home-spun economic data was the "pending home sales" index, which is compiled and released by the National Association of Realtors. By their measure, pending home sales (i.e. contracts to purchase existing homes) increased by 2.1% in February, although they are down nearly 10% from Feb 2010. While I will say that it is likely that, with banks looking to unload foreclosed inventory to make room for even more foreclosures, there was a marginal increase from January's depressed levels, this data is extraordinarily inconsistent with the purchase mortgage application data released on a weekly basis by the Mortgage Bankers or America Association, which has been plummeting almost every week. If you are looking for a reason to question the reliability of the NAR's data, besides applications for mortgages to purchase a home, then take a look at this remark by Lawrence Yun, the chief economist for the NAR and perpetual cheerleader/data-spinner: “We may not see notable gains in existing-home sales in the near term, but they’re expected to rise 5 to 10 percent this year with the economic recovery, job creation and excellent affordability.” LOL
Here's the LINK from Bloomberg news.
If you want good insight to what is really going on in the economy, here is the Bloomberg summary of the Goldman Sachs weekly same-store-sales index, which was up .2%: "the report says March has been a tough month for retailers but ties the weekly gain to strength at supermarkets and drug stores offsetting weakness for seasonal spring goods."
Please note two things: 1) the weekly "strength" was tied to supermarkets/drug stores, which I would argue is inflation-based, not unit volumn-based and 2) there was noted weakness for seasonal spring goods, which I would argue is indicative of declining "discretionary" spending. Both observations lead me to conclude that the economy is double-dipping...
And then there was this Case-Shiller monthly 20-city home price index, which showed an across-the-board decline in home values in January, except of course in Washington, DC. Here's the LINK This is really bad news because, as I have demonstrated in previous posts, the C-S index is skewed away from the price-effect of foreclosures, and thus understates the true decline in home prices going on out there. This is horrible news not only for current home owners, but also for the banks and investors who are invested in mortgage paper, which is losing its "equity" cushion on a steady basis.
Anyone think QE2 will be it for the time being? Better think again because with collateral value shrinking in this country and the economy headed back into the tank, if the Fed were to stop printing money it would likely lead to economic armageddon, not to mention the fact that the Government would lose its primary source of funding...
And now for what you would think is a joke, but falls into the "so absurd that I couldn't have made this up" category, it was announced yesterday that Obama's former press secretary, Robert Gibbs, is going to sign a major league employment agreement with Facebook, to help them with communications. Here's the LINK I guess one would have hoped that anyone associated with Obama's Presidency would devote their career to making America a better place to live. But then again, Obama and his clan completely shed their campaign skins once they got into office, so I guess I shouldn't be surprised that Gibbs decided to whore himself out like this for the sake of his bank account.