What do we make of the mixed figures on consumer spending in the United States? If you look at the numbers in more detail, you will see that the US economy is totally screwed.
At first impression, the figures are conflicting. The US Commerce Department says retail sales are down but a Reuters/University of Michigan consumer-sentiment survey rose to 75.5, above the 74 reading expected by economists. How can we explain that?
Very simple, the rich are the ones spending and the rest of the population is not.
A Gallup poll shows that upper income Americans, the ones earning over $90K are spending more. Commentators say they have "frugality fatigue" and are now buying. Significantly, spending was up for those aged 65 and over. It's a different story for the bulk of the population earning less than $90,000 and who are under the age of 65.
The Gallup commentators this is great news for the US economy but that just show how stupid some economists are.
If the bulk of the population is not spending, demand will remain low which means companies won't be hiring which means unemployment in the world's richest country remains somewhere close to 10%. Troubled by high unemployment, most people (the ones earning less than $90K and who are younger than 65) are spending less. There can be no recovery without an uptick in consumer confidence and all signs say that will remain low. With US home prices dropping almost 30% from their peak and stocks now giving up some of the past year's gain, we can't expect that will change. There can be no recovery if only the old and rich are spending.
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