Another set of flat economic indicators

posted at 3:35 pm on May 28, 2010 by Ed Morrissey

If the economy is making an “amazing resurgence,” as John Kerry claimed this week, then someone forgot to tell the American consumer.  After picking up the spending pace in the winter, Americans have started saving again, as consumer spending went flat in April:

Consumer spending was stagnant in April while incomes posted a tiny advance, signs that the economic recovery could slow.

The flat spending level was the weakest showing in seven months, according to the Commerce Department report. Economists had expected a 0.3 percent rise. …

Consumer spending is closely watched because it accounts for 70 percent of total economic activity.

The unchanged level of spending came despite a 0.6 percent rise in March. It also was flat despite a 0.4 percent rise in April retail sales.

Retail only accounts for 40% of all consumer spending, according to the AP, which is why there is a disconnect between the two numbers.  This follows on the slight downgrading of 2010Q1 GDP from 3.2% to 3.0%, which is probably unwelcome but not necessarily unusual.  Last year, the Obama administration had to reset 2009Q3 GDP twice, going from 3.5% to 2.2%; this adjustment is part of a more normal revaluation of indicators after they have firmed up.

The sudden switch to savings mode comes at the same time that the private bond markets appear to have suddenly tanked:

Companies sold the least amount of bonds in a decade this month as concern Europe’s sovereign debt crisis will slow the global economy drove up relative borrowing costs by the most since the aftermath of Lehman Brothers Holdings Inc.’s collapse.

Borrowers issued $66.1 billion of debt in currencies from dollars to yen, a third of April’s tally and the least since December 2000, according to data compiled by Bloomberg. At least 14 companies withdrew offerings, including New York-based retailer Jones Apparel Group Inc. and theater chain operator Regal Entertainment Group.

“There’s still a lack of risk appetite for company debt,” said Ben Bennett, who helps manage the equivalent of $125 billion of corporate bonds as credit strategist at Legal & General Investment Management in London. “There needs to be a couple more days of stability before we see green shoots. At the moment it’s a small, straggly weed.”

Companies sell debt in order to cover payroll and other short-term expenses, but also to expand and innovate.  The sharp drop in lending signals a sudden, hopefully momentary halt in expansion.  This could be just a blip, but it could also signal a further tightening of belts by corporations and a harbinger of another dip back into recession.

Why might there be “a lack of risk appetite”?  Foremost, investors don’t share the sunny analysis provided by John Kerry, obviously.  At least in the US, risk-taking is about to be punished by a hike in capital-gains tax rates, as well as a punitive tax measure aimed at capital investment managers.  That may or may not be impacting this month’s numbers directly, but it certainly isn’t whetting appetites for the kind of risk-taking needed to start a significant economic expansion.

Right now, it doesn’t appear that anyone outside the political world sees an “amazing resurgence” anywhere.


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Kerry needs to put some ketchup on his money and put it where his mouth is.

This economy sucks and no amount of spinning by the MSM or the Obama “administration” is going to change that fact.

You can’t affirmative action the economy into a success, so Obama is now fresh out of ideas.

NoDonkey on May 28, 2010 at 3:38 PM

it certainly isn’t whetting appetites

Honestly, things aren’t going to improve until the new Republicans take over Congress.

John the Libertarian on May 28, 2010 at 3:39 PM

Switch to savings mode???I’m underwater every month. Who has extra cash to save?

Kissmygrits on May 28, 2010 at 3:40 PM

Honestly, things aren’t going to improve until the new Republicans take over Congress.

John the Libertarian on May 28, 2010 at 3:39 PM

I don’t know how much they’ll be able to turn things around unless they win both houses which is a long shot.

Doughboy on May 28, 2010 at 3:40 PM

The worst set of economic indicators is the Pack of National Socialist Lunatics in charge of the government.

Chip on May 28, 2010 at 3:42 PM

I don’t have any money to spend or save. Paycheck to paycheck for nearly a year now.

IrishEi on May 28, 2010 at 3:43 PM

I can see a recovery from my house! Or is that Russia?

Sugar Land on May 28, 2010 at 3:43 PM

I’m sure the donk congress spending another $300,000,000,000.00 in deficit for the year has nothing to do with it.

jukin on May 28, 2010 at 3:44 PM

Obama is trying to increase disposable income. He’s making the dollar worthless so it’s totally disposable.

Daggett on May 28, 2010 at 3:44 PM

By amazing recovery Lurch of course meant in comparison to how bad the economy will be six months from now .

We will remember 2010 as the good old days .

DeweyWins on May 28, 2010 at 3:45 PM

This flat economy was a bargain with that 1 tillion dolla stimulus

Inanemergencydial on May 28, 2010 at 3:46 PM

I have been spending less and les, but I’m still not in any position to increase how much I can save each month.

myrenovations on May 28, 2010 at 3:46 PM

Right now, it doesn’t appear that anyone outside the political world sees an “amazing resurgence” anywhere.

It Seems like the political class exists in their own little world, with blue skies all the time and unicorns prancing about in fields of poppies.

Chip on May 28, 2010 at 3:47 PM

It Seems like the political class exists in their own little world, with blue skies all the time and unicorns prancing about in fields of poppies.

For them it is. There has never been a spending spree like this and they are drunk on it.

jukin on May 28, 2010 at 3:49 PM

And the Bush tax cuts expire in December, adding another burden to investors and to spending.

mankai on May 28, 2010 at 3:50 PM

Hello!

Tax Refunds!

And for the first time that I know of, the IRS sent refunds to people that missed claiming the “Making Work Pay” tax credit where it pushed them into, or increased, their refund status. Does the IRS usually send out refunds for credits the taxpayer failed to claim on their own?

I would bet that accounted for all the increase in March and keeping it flat in April. Look for a drop in May and unemployment spike as well as college grads hit the job market.

PastorJon on May 28, 2010 at 3:50 PM

I can see a recovery from my house! Or is that Russia?

Sugar Land on May 28, 2010 at 3:43 PM

No , it’s the government coming to “plug your hole”.

the_nile on May 28, 2010 at 3:51 PM

The fake effects of shoving a few hundred billion into the economy is starting to wear off… so they want to shove a couple of more hundred billion in to keep it afloat until November.

Eventually, the money runs out and the interest payment becomes too burdensome and the house of cards collapses… and we become Greece II (without Michelle Pfeiffer or even Lorna Luft).

mankai on May 28, 2010 at 3:53 PM

Bureau of Economic Analysis
National Economic Accounts

EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, FRIDAY, MAY 28, 2010BEA 10-23

=========================================

http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm

canopfor on May 28, 2010 at 3:55 PM

For them it is. There has never been a spending spree like this and they are drunk on it.
jukin on May 28, 2010 at 3:49 PM

Is there such a thing as AA for politicians?

I guess we could think of November as the people’s “Intervention” – we’re going to send them all to ‘rehab’.

Chip on May 28, 2010 at 3:56 PM

He’s making the dollar worthless so it’s totally disposable.

Daggett on May 28, 2010 at 3:44 PM

If that’s the case he should put his picture on it so we can use it as toilet paper.

NoDonkey on May 28, 2010 at 3:59 PM

I’ve been Galt for so long – I don’t know what else to cut. Food? Electricity? Gas?

skree on May 28, 2010 at 4:01 PM

I’m starving the beast as much as I can. Barter is better than helping these marxist a-holes and their sham ‘recovery’.

Monica on May 28, 2010 at 4:05 PM

U.S. Economy at a Glance: Perspective from the BEA Accounts

http://www.bea.gov/newsreleases/glance.htm

canopfor on May 28, 2010 at 4:06 PM

http://www.commerce.gov/

canopfor on May 28, 2010 at 4:07 PM

Right now, it doesn’t appear that anyone outside the political world sees an “amazing resurgence” anywhere.

That is because there isn’t going to be one, and there isn’t meant to be. In accordance with Obama’s and the progressive movements agenda they don’t seek grow the economy, but to curtail it. This is how they intend to attain “social justice” as preisely demonstrated during the 08 primary debate when Charlie Gibson asked;

http://www.youtube.com/watch?v=WpSDBu35K-8

They cannot bring everyone to the pinnacle of the economic ladder, so to acheive fairness they are attempting to toss us all into the economic abyss. Then there is parity of despair, or as the like to phrase it-”social justice”.

This why they’re bitterly clinging to the false global warming/eco-fascism mindset of cap and trade with the target of the US reducing its energy/CO2 output to 1910 (or when adjusted for pop increase from 70 to 310mil currently, 1867) levels. Effectively bringing us down to 3rd world status living in hovels without electricity & running water. As Horner recently otlined in Power Grab;

As I detailed in “Power Grab: How Obama’s Green Policies Will Steal Your Freedom and Bankrupt America”, he and his administration are engaged in a series of efforts designed to impose artificial physical scarcity, and otherwise price scarcity, through new laws, and extending and expanding the application of existing ones.

Obama and his cabal of ecofascistic authoritarians are not in the business of increasing our economic activity, their intent is to starve the beast of capitalism that has acheived the greatest burst of prosperity the world has ever seen. Until the blinders fall from the eyes of the sheeples who beleive this criminal cadre has any but nefarious intentions is dispelled, we will be guilty of the same attribute as they when they fail to profess that terrorism has it roots of true Islam, that is we are failing to accurately identify the enemy.

Archimedes on May 28, 2010 at 4:08 PM

Obama has no financial experience. He relies on advice from the Harvard grad puppy mills that exist to create his labdogs. Obama is a 10 trillion dollar Onshore disaster. It needds to be plugged. Plugs Biden is not cutting it either.

seven on May 28, 2010 at 4:11 PM

Call jimbo, calling jimbo your spin is needed, your spin is needed.

CWforFreedom on May 28, 2010 at 4:15 PM

Foremost, investors don’t share the sunny analysis provided by John Kerry, obviously.

Put a boot on John Kerry’s neck.

Boycott Heinz ketchup, and Massachusetts.

fogw on May 28, 2010 at 4:17 PM

I’ve been Galt for so long – I don’t know what else to cut. Food? Electricity? Gas?

skree on May 28, 2010 at 4:01 PM

I am in the process of closing on a prop/biz with 4 ’30 X’96
hydroponic greenhouses that produces 3-4000lbs of vegetables a week (38 weeks of the year) in preperation of our pending economic collapse, thats how Galt I’ve gone!

Archimedes on May 28, 2010 at 4:17 PM

Obama and his cabal of ecofascistic authoritarians are not in the business of increasing our economic activity, their intent is to starve the beast of capitalis

Archimedes on May 28, 2010 at 4:08 PM

Archimedes:Good recall,I do remember watching that,and
after watching it,Hillary looks like she can’t
believe that Obama has a shot,the audience is
aghast,Gibson looks on like you can’t be serious.

What gets me,is that Obama was more concerned
about jacking up the gains tax,because he see’s
(his mindview)that the secretary was getting
screwed over,

meanwhile,the implications over all,is that he
will be screwing around with the US Economy,and
the real goal,as everyone has found out,is the
war on CAPITOLISM!!!!!!!!

canopfor on May 28, 2010 at 4:22 PM

If that’s the case he should put his picture on it so we can use it as toilet paper.

NoDonkey on May 28, 2010 at 3:59 PM

I’d put THAT in his suggestion box.

If he had one.

And if he could read something other than a teleprompter.

And if he actually cared about anyone’s opinion but his own.

Daggett on May 28, 2010 at 4:37 PM

But he’s wearing the halo in the picture!

Key West Reader on May 28, 2010 at 4:40 PM

Investors may be averse to taking on risk because the financial regulatory bill will allow the Treasury to take over firms at will. What would that do to your investment?

hawksruleva on May 28, 2010 at 4:43 PM

Personal economic indicator: pay remains flat at $0…landed a ‘job’ at a podunk summer camp where pay is essentially room and board. Yippity-skippty, as an old friend used to say. What a wonderful future this glorious corporatist state has for my generation.

Dark-Star on May 28, 2010 at 4:51 PM

I hate a flat set of indicators.

So does the government: hence the proposed additional Silicone-Stimulus to get us a set of proud indicators. Still false, but proud! Almost…lifelike…

karl9000 on May 28, 2010 at 4:56 PM

This economy sucks, and will suck until spending is steeply cut, and taxes are lowered for businesses.

therightwinger on May 28, 2010 at 5:13 PM

Racist economy, it doesn’t want a half-black half-witted president to succeed.

We just need to jump start it with ACLU lawsuits and have the nutroots call it names, that will do the trick.

NoDonkey on May 28, 2010 at 5:43 PM

The sharp drop in lending signals a sudden, hopefully momentary halt in expansion.

Or it might be signaling the start of the 2nd dip of a double dip recession.

chemman on May 28, 2010 at 7:47 PM

Let’s not forget the stupid home tax credit that just expired. Like cash for clunkers, it simply moved demand up earlier in the calendar at the expense of sales later. It gave the morons in the WH a chance to show how “good” the economy was for a while but guess what? It didn’t “kickstart” the economy, it simply made for a few months of rosier numbers at the expense of lousier numbers going forward.

MJBrutus on May 28, 2010 at 8:26 PM

Why take a “risk” if Barry is going to TAKE your reward and SHARE it with someone who took no risk at all?

GarandFan on May 28, 2010 at 10:19 PM

Obama has no financial experience. He relies on advice from the Harvard grad puppy mills that exist to create his labdogs. Obama is a 10 trillion dollar Onshore disaster. It needds to be plugged. Plugs Biden is not cutting it either.

seven on May 28, 2010 at 4:11 PM

Maybe we can use the BP solution and cram golf balls and mud up their a$$es to stop the financial leak??

landlines on May 28, 2010 at 11:49 PM

How long does a patient have to be flat line in this administration before being declared dead?

MSGTAS on May 29, 2010 at 10:25 AM