Our Economy Is In Big Trouble: Business Sales Is Slowing At An Increasing Rate, US Consumer Makes, Spends Less In October, Real Income Falls For Third Month, And Deflation Started in Europe Will Soon To Overtake The US
November 30th, 2012
CHICAGO PMI RISES TO 50.4 — But Huge Drop In New Orders
from Chicago PMI:
Employment 55.2 vs. 50.35 prior. New orders 45.3 vs. 50.6 prior. Prices paid 70.1 vs. 59.3 prior. Inventories 47.1 vs. 49.6 prior. Supplier deliveries 57.3 vs. 50.4 prior.
Big jumps in supplier delivery times, employment, and prices look to be behind the improved headline read in the Chicago PMI, but the gauge’s best leading indicator – new orders – took a big hit, falling to 45.3 from 50.6, the lowest level since June 2009. “Business sales (have) been slowing throughout the year, and continue to slow, but now at an increasing rate; becoming very alarming.” (full report)
US Consumer Makes, Spends Less In October, Real Income Falls For Third Month
It was only appropriate that on a day in which our chart of the day confirmed that the US consumer is getting increasingly more broke, we got an update of Personal Income and Personal Spending, both of which missed expectations and declined substantially. October income printed at 0.0%, down from 0.4% in September, and below expectations of 0.2%, while spending plunged from 0.8% all the way into negative territory at -0.2%, missing expectations of an unchanged print. Counterintuitively, the spin is that this miss was due to Sandy, when this makes absolutely zero sense: as a reminder Sandy only hit in the last 4 days of October, which means it had no time to impact income, and if anything it prompted an increase in spending as consumers stockpiled ahead of the landfall. But that’s why they call it spin. Of course, none of this should come as a surprise: the implied savings rate in September hit a multi-year low of 3.3%, which means going forward the blend of spending and savings will be unpleasant for stocks as consumers have no choice but to rebuild savings once more. And finally, the most disturbing metric, and one which is a red flashing light for all those predicting yet another economic renaissance in 2013, is that real Disposable Income declined by 0.1%: the third decrease in 3 months, confirming that on an inflation adjusted basis the consumer peaked in the summer, and it is all downhill from here.