The stock market has stumbled lately, and we have looked to Europe as the cause. But our problems are primarily domestic, not imported. Consumer demand remains lukewarm.
Take a look at some recent data.
Yesterday the Federal Reserve released April figures for consumer credit:
http://www.federalreserve.gov/releases/g19/Current/
Household borrowing grew by only $12 billion at a seasonally adjusted annual rate. The chart below shows that $100 billion is a healthy number. Consumer credit may no longer be shrinking, but household borrowing is not yet robust. It has to grow more quickly if we want a strong signal that consumer demand is truly recovering.
Consumer Credit
(Click on chart to enlarge.)
Recessions shaded
The latest data on auto sales confirm the problem. Households borrow to support their spending, and that spending remains lukewarm.
If you go to the Bureau of Economic Analysis website at http://www.bea.gov/national/index.htm#gdp and scroll down to "Underlying Detail Tables" and then look at "Motor vehicles," you will find an Excel table. Click on tab number six to see new-vehicle sales.
The Commerce Department reported 11.6 million new-vehicle sales in May at a seasonally adjusted annual rate. The chart below reveals that sales must rise to 15 million before we can say that the auto industry has truly recovered. We are only halfway back from the depths reached at the bottom of the recession.
New-Vehicle Sales
(Click on chart to enlarge.)
Recessions shaded
Our biggest problem remains at home not abroad.
(The charts were taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2010 Michael B. Lehmann
1 comment:
great article, very insightful about consumer credit and domestic demand. What about the rebound of the dollar against the Euro, will that make the recovery even more off as int'l demand for US products becomes more expensive?
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