Thursday, December 8, 2011

Consumer Spending

The Lehmann Letter (SM)

Take a look at two leading indicators recently released by the Federal Reserve and the Department of Commerce.

The Fed reported that consumer credit (excluding mortgage borrowing) had risen by $92.4 billion, at a seasonally adjusted annual rate, in October. The chart shows that a strong economy depends upon around $100 billion monthly in new consumer credit. The chart also shows that households desperately reduced outstanding debt during and immediately following the recession. Now they are beginning to borrow once again. We will see whether or not consumer credit rises to the $100 billion level required to generate strong growth in aggregate demand.

Consumer Credit

(Click on chart to enlarge)

(Recessions shaded)

The Commerce Department reported new-vehicle sales of 13.6 million, seasonally adjusted annual rate, in November. The chart reveals that this continues the upward trend, climbing out of the bottom of the recession. Will it continue rising to the 17-million annual rate that signals a vibrant auto industry? We'll see.

Auto sales

(Click on chart to enlarge)

(Recessions shaded)

This letter will return to these indicators regularly. The economy can't fully recover unless they fully recover.

(To be fully informed visit

© 2011 Michael B. Lehmann

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