Savings Rate Soars To Record Highs As American Consumer Spending Crashes By Most Ever

After spending collapsed (and incomes dropped) in March, April was expected to see even worse but there was a surprise!

While spending collapsed 13.6% MoM (the biggest drop on record), incomes soared 10.5% MoM (the biggest surge on record) as we assume that this reflects massive government transfer payments...

Source: Bloomberg

And on a YoY basis, the shift is massive... an 11.7% surge in incomes and 3.1% slump in spending...

Source: Bloomberg

The surge in incomes is entirely due to massive government transfer payments...

Here is that percentage change put in absolute context... basically, the government has added $3 trillion in annualized income... from $3.348TN in March to $6.367TN in April (both annualized)

As private and government wages collapsed...

Consumer spending decreased in April, reflecting decreases in both goods and services.

Within goods, the leading contributor to the decrease was spending on food and beverages data. Spending on prescription drugs
also decreased.
Within services, the leading contributor to the decrease was spending on health care, based primarily on employment, hours, and earnings data as well as credit card data. Other contributors to the decrease in services were spending on food services and accommodations.
And finally, The Fed's favorite inflation indicator - Core PCE Deflator - collapsed to 9 year lows...

Source: Bloomberg

The surge in incomes and plunge in spending sent the savings rate to record highs...

The question is - what happens when that government transfer runs out? Are people changing their behaviors? Is the uncertainty forcing a desire to save more and if so, will that wind up having a lasting effect on consumer spending? That has to be watched out for.

Commenti

Post popolari in questo blog

Fwd: The Looming Bank Collapse The U.S. financial system could be on the cusp of calamity. This time, we might not be able to save it.

After months of living with the coronavirus pandemic, American citizens are well aware of the toll it has taken on the economy: broken supply chains, record unemployment, failing small businesses. All of these factors are serious and could mire the United States in a deep, prolonged recession. But there's another threat to the economy, too. It lurks on the balance sheets of the big banks, and it could be cataclysmic. Imagine if, in addition to all the uncertainty surrounding the pandemic, you woke up one morning to find that the financial sector had collapsed. You may think that such a crisis is unlikely, with memories of the 2008 crash still so fresh. But banks learned few lessons from that calamity, and new laws intended to keep them from taking on too much risk have failed to do so. As a result, we could be on the precipice of another crash, one different from 2008 less in kind than in degree. This one could be worse. John Lawrence: Inside the 2008 financial crash The financial

Continua a leggere

3 Reasons Why Gold Will Outperform Equities And Bonds

3 Reasons Why Gold Will Outperform Equities And Bonds https://www.forbes.com/ 3 Reasons Why Gold Will Outperform Equities And Bonds For centuries, gold has played a major role in human history and has become interwoven into the financial fabric of society. Beyond its investment following, gold has become synonymous with wealth. Historically, gold's early use cases revolved around money – a form of "medium of exchange". After the second world war however, several countries and their respective currencies, started to shift away from the gold standard and migrated towards a fiat currency system. Today, gold remains largely a "Store of Value", and due to its unique properties and large number of use cases, it has managed to distance itself from other asset classes in terms of correlation, demand / supply drivers, and investment purpose. Gold's idiosyncrasies function as a double-edged sword, as it is challenging to predict

Continua a leggere

What Will Stocks Do When “Consensual Hallucination” Ends?

The phenomenon works – until it doesn't. What's astonishing is how long it works. There is a phenomenon in stock markets, in bond markets, in housing markets, in cryptocurrency markets, and in other markets where people attempt to get rich. It's when everyone is pulling in the same direction, energetically hyping everything, willfully swallowing any propaganda or outright falsehood, and not just nibbling on it, but swallowing it hook, line, and sinker, and strenuously avoiding exposure to any fundamental reality. For only one reason: to make more money. People do it because it works. Trading algos are written to replicate it, because it works. It works on the simple principle: If everyone believes stocks will go up, no matter what the current price or the current situation, or current fundamental data, then stocks will go up. They will go up because there is a lot of buying pressure because everyone believes that everyone believes that prices will go up, and so they bid up

Continua a leggere

Faber News Flow

Cerca nel blog