Profligate Americans and Economic Expansion
Lock
JACKSON HOLE, Wyo. -- The
tired-ass claims that the consumer is
rolling over are entirely bunk.
Allow your narrator to put things in perspective.
Nineteen ninety-eight went down as the strongest spending year of the current economic expansion.
Retail sales rose 4.9% during that year.
The August
numbers released this morning revealed that retail sales are growing at a 10.5% year-on-year rate.
That goes down as the fourth best performance of the cycle.
The fourth best retail sales performance in more than eight years.
Retail sales would turn in a 1999 increase of 8.5% -- an increase 73% bigger than the one recorded during the strongest spending year of the current economic expansion -- if we ended the year right now.
With four months of 1999 data remaining.
Stock
How bout the broader consumption picture?
How bout the
personal consumption expenditure
series?
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The one that (unlike the retail sales series) includes spending for services?
The one that
accounts for 69% of the
gross domestic product
number?
It rose 5.7% last year.
Then it grew at a 6.6% year-on-year rate during the first quarter of this year.
Then it grew at a 6.6% rate again during the second.
And now it is likely to grow at a 6.6% rate again during the third.
And those 6.6% growth rates go down as the second best of the cycle.
The second best PCE growth rates in more than eight years.
The pace of consumption didn't decelerate between 1995 and 1996, it didn't decelerate between 1996 and 1997, it didn't decelerate between 1997 and 1998, and it won't decelerate between 1998 and 1999.
The last time the pace of consumption decelerated was between 1994 and 1995.
In the wake of
Fed
action that drove the
funds rate
to 6% from 3%.
And Two Smoking Barrels
The people who continue to forecast spending slowdowns that do not come to pass -- and the people who continue to listen to them -- refuse to accept some very key things.
There will be no meaningful consumption slowdown without a meaningful income slowdown.
There will be no meaningful income slowdown without a meaningful employment slowdown.
And there ain't no meaningful employment
slowdown afoot.
And keep in mind the final
Meyer
nugget discussed in this
space last week.
Although there is some risk that growth could remain above trend and therefore aggravate any initial excess demand, a major concern remains that the prevailing balance of supply and demand in the labor market might put upward pressure on inflation, even if growth slows to trend ahead.
If the Feds are going to worry about costs and prices even if growth slows to trend, you can bet that they'll be fretting even more on signs that it isn't doing so.
And slowdowns don't just magically happen.
They don't appear out of thin air.
If the Feds really want one, they're going to have to make it themselves.
Side Dish
Careful. Today's bond action is tricky. The thing could easily rally a point on a good price report tomorrow.
And hey. Lieberman is 5-2 over the first two weeks of the season (and he delivered a great weekend pick -- the over on the
Cincy-Titans
game -- that I couldn't get to you in time). So do us all a favor and go
vote if you haven't already. And write
Kansas and tell him that the column is a keeper.
And to the Denver fans who lost money to me last night?
You can all bite me.
Not gonna happen?
Subway series.
Denver three-peat.
Mirer Super Bowl MVP.
Sosa thumping chest 71 times.
Gambling column best thing on site.
