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Although President Biden keeps insisting his economic programs are working great, there are plenty of troublesome signs indicating otherwise, including the all-important rate of consumer spending. Simple rule: if people are buying more things, it generally means they feel good about the state of their finances and the economy.
When folks tighten their belts, however, it’s because they either simply don’t have enough money to purchase more than the essentials, or they’re holding on to their wallets because they fear for the future.
Consumer spending is often known as the “engine of the economy”—and it’s out of gas. The Wall Street Journal reports that Americans are “starting to freak out”:
Retail purchases have fallen in three of the past four months. Spending on services, including rent, haircuts and the bulk of bills, was flat in December, after adjusting for inflation, the worst monthly reading in nearly a year. Sales of existing homes in the U.S. fell last year to their lowest level since 2014 as mortgage rates rose. The auto industry posted its worst sales year in more than a decade.
Consumer spending growth is decelerating in every major category, from services to goods.
The squeeze on households is becoming clear. pic.twitter.com/14eIJBScWz
— Eric Basmajian (@EPBResearch) January 28, 2023
Consumer spending actually rose during the second half of 2020 in the height of the pandemic, as a locked-up population bought new TVs, exercise bikes, and computers to while away their days stuck at home. Then came the stimulus checks, billions in free money from the government. Who feels guilty for buying themselves a little something when a fat, unexpected check shows up in the mailbox?
Those days are over. Now that Biden’s inflation has become the norm, consumers are wary of putting debt on high-interest credit cards or taking out a car loan at six percent. Housing sales have plummeted because high mortgage rates have reached a 20-year high, increasing monthly payments by hundreds or even thousands per month. Meanwhile, the Federal Reserve has signaled that yet another rate hike might come this week.
Housing market update:
1. Mortgage demand lowest since 1997
2. Housing affordability index below 2008 low
3. New home inventory highest since 2008
4. Home price to income ratio at record high
5. Home sales down 32% in 2022 to record low
The housing market is in a recession.
— The Kobeissi Letter (@KobeissiLetter) January 14, 2023
Why is consumer spending so important? If it doesn’t pick up again soon we soon might find ourselves in a recession (assuming we’re not already):
Consumer spending accounts for roughly 70% of the economy. A downshifting consumer is a key reason that business and academic economists polled by The Wall Street Journal, on average, put the probability of a recession in the next 12 months at 61%.
One of the few positive economic signs is that the unemployment rate is low at 3.5 percent. However, tech and retail giants including Amazon, Meta, Google, and others have all announced mass layoffs recently, other companies are axing temporary employees, and people are taking longer to find jobs.
All of this would be news to Clueless Joe, but he (or one of his minions, presumably) just keeps posting gaslighting tweets about all his accomplishments:
Our plan to build an economy from the bottom up and middle out is working. pic.twitter.com/hxt1JTpU87
— President Biden (@POTUS) December 10, 2022
I’m not an economist, but I don’t think you have to be one to know what’s going on here: just go to the grocery store or your favorite restaurant. Once you re-emerge—shell-shocked—you’re unlikely to go home and make a spur-of-the-moment Amazon purchase for that thing you don’t really need.
Biden’s drunken sailor spending and the bloated Inflation Reduction Act have brought on these conditions, and unfortunately, they could get a whole lot worse before they get better.
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