The consumer is obviously in trouble, looks like the tax refunds are lower than expected (apparently lower mortgage deductions), and she has a food and energy subsistence squeeze coming on. Will need the whole tax refund just to pay March's gasoline bill. But, I expect him to borrow what they need through ARMs, home equity, credit cards, whatever it takes, and that will continue fuel enough demand to finish this next and final phase of the Train Wreck and inflationary shock.
Glad you caught that. I was going to post on those refunds and I bet they are not as big as expected. I was aware of the mortgage interest drop but forgot to post on it. Did we need those tax cuts just to break even. Throw in medical expenses and poor wage growth (did you really think it would be better? I thought it would be worse! But we both agree in REAL purchasing power it TOTALLY SUCKED. I assume we agree on that). Gas sales count as GDP but I am pretty sure we agree that it is not really beneficial GDP here. In fact, do we know how much energy costs contributed to overall GDP? How much computer and other hedonics? How much military spending? All those are FLUFF IMO.
So where are we?
The consumer has less money to spend taking into consideration medical expenses, gasoline, tax cuts, home interest deductions, food, necessities, etc.
Russ, Do you agree with that last sentence?
Car sales should probably fall thru the floor (I say as my wife just bought one, but we got $100 over invoice, $2500 STANDARD rebate, $500 auto show bonus and we did not go to the auto show, $750 free upgrades, and they let us out of our lease 6 months early). Seemed like a good deal so we took it. Perhaps sales pick up ONE time due to this nonsense but how much are they making on these offers.
Went to two different dealers, and the first one (not where we ended up buying) said GM was struggling to meet it pension fund contribution and needed sales fast so offering all kinds of discounts. I was surprised that he knew about GM's pension woes and voluntarily offered that info.
Sorry for the diversion. Where are we.
We are at huge discounts before the marginal customer bites on new debt. Incomes not keeping up with inflation, refinancings stalled, no job growth to speak of, new jobs at $10,000 less on average than jobs lost.......
You do not think this boom just dies on its own accord without a hike?
I do
Mish |
