Fat lady yet to sing for US consumer
Simon Ward
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Amid all the gloom and doom, here are some reasons for thinking US consumer spending is not about to collapse:
- Vehicle sales – normally sensitive to shifts in consumer sentiment – held steady at a 16.2 million annualised rate in November, in line with the year-to-date average.
- Withheld employment tax receipts – a good real-time indicator of incomes – rose at a respectable 5.3% annual pace in October / November.
- Layoff announcements have remained broadly stable in recent months – November’s total was down 5% from a year before.
- Mortgage applications have picked up in response to a steep fall in mortgage rates for non-jumbo prime loans, with the four-week moving total at its highest since 2005.
- Reflecting lower house prices as well as mortgage rates, the National Association of Realtors’ housing affordability index has also recovered to a two-year high.
- Retail gasoline prices have started to come down in lagged response to lower wholesale prices, which are back at mid-October levels.
- Wal Mart’s share price has perked up recently and usually correlates well with short-term swings in retail sales – see chart.
While ongoing money / credit market stresses are concerning, my indicators suggest the odds currently remain against a US recession.
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