Tuesday, August 2, 2011

The Consumer Isn't Spending

The Bureau of Economic Analysis just came out today with their monthly personal consumption expenditure (PCE) statistic, one of the more important ones out there as it represents approximately 70% of the economy (it also is cleaner as it's not muddied by inventories and imports/exports). Like other recent statistics, this one also was negative. I downloaded the data to make a year over year change analysis in order to negate any seasonal factors:

Personal consumption expenditures are clearly rolling over putting our economy about where it was in the fourth quarter of 2007 (and we know how things turned out then). Even more disturbing is the fact that if you look at the monthly data, we've had three straight months of lower spending so that June is actually 0.3% lower than March. Don't be shocked if in the future you find out that the next recession might have already started once all the revisions of GDP are in.

While this is going on, Obama has been continuously talking about raising taxes, first during the debt ceiling debate and, now that it's over, he's talking about reversing the Bush tax cuts at the end of 2012. Considering this and the plethora of taxes that come with Obamacare, Obama and his cronies seem to be making our economy worse and not better. People's spending habits are based on their expectations, both for their personal revenues and for their expenses. When it's clear that their taxes are going to go up soon, why would they spend or invest the money they have?

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