Authored by Mike Shedlock via MishTalk.com,
Consumer spending hit a brick wall in the US, EU, UK and Australia. Guess what that means…
Is the global consumer starting to capitulate?
Not Just EU
What About Australia?
“There are limits to the amount of spending that can continue when savings is being drawn down.”
“If these PCE figures are accurate, it looks like consumers may be moving faster than originally guessed.”
Question and Answer of the Day
“If the consumer capitulates, what will drive growth?”
Welcome to the Global Recession!
Bob Elliott and I have been in a running debate for a couple of months over jobs and a recession.
I follow him because he always makes a strong case for his point of view: No Recession.
Elliott is very data dependent, and cautious. This is the first I have seen him waver.
My “welcome” comment was not intended to be mocking, it’s simply how I feel.
To be fair, I was early again, but not as early as some. I did not bite on the two consecutive quarters of negative GDP to start the year, but I did pencil in a recession starting in May.
In October, retail sales forced me to admit my error. But in December, industrial production and retail sales put me back in the recession camp.
Let’s go over the data.
Signs Say Industrial Production Has Peaked and so a Recession is Imminent
Recession lead times in months based on Fed data.
On January 18, 2023, I commented Signs Say Industrial Production Has Peaked and so a Recession is Imminent
Industrial production decreased 0.7 percent in December and 1.7 percent at an annual rate in the fourth quarter.
Industrial Production Synopsis
Industrial production peaked in October
Manufacturing peaked in April with a double top in September
Consumer durable goods peaked in April
Manufacturing durable goods peaked in September
Motor vehicles and parts peaked in October
Recession lead times vs industrial production tend to be very small, typically 1-2 month. 2001 and 2020 were notable exceptions.
Existing Home Sales Decline for the Eleventh Straight Month
Existing home sales from the National Association of Realtors via St. Louis Fed
It was nearly a clean sweep for existing home sales in 2022, down every month except January.
For details, please see Existing Home Sales Decline for the Eleventh Straight Month
December Was Another Retail Sales Disaster
Retail sales from commerce department, chart by Mish
Month-Over-Month Advances and Declines
Food Service: -0.9 percent
Food Stores: +0.0 percent
Gas Stations: -4.6 Percent
General Merchandise: -0.8 Percent
Excluding Motor Vehicles and Gas: -0.7 Percent
Excluding Motor Vehicles: -1.1 Percent
Nonstore (Think Amazon): -1.1 Percent
Motor Vehicles: -1.2 Percent
Department Stores: -6.6 Percent
For further discussion, please see December Was Another Retail Sales Disaster, Even Worse With Negative Revisions
The BEA agreed with the advance numbers.
Personal Spending Hits a Solid Brick Wall in December Despite Rise in Income
Real Personal Consumption Expenditures from BEA, chart by Mish
On January 27, I noted Personal Spending Hits a Solid Brick Wall in December Despite Rise in Income
Brick Wall
Consumers literally hit the brick wall then went into reverse in November and December.
Real PCE fell 0.2 Percent in November and 0.3 percent in December.
Real PCE Goods were negative 0.9 percent in both months.
Real PCE Services rose 0.2 percent in November and was flat in December.
Data Consistent With Recession
Please see Alice Debates the Mad Hatter and the Red Queen on Timing the Recession
If for some reason you believe fourth-quarter GDP was robust, please see 4th Quarter 2022 GDP Is Much Weaker Than Headline Numbers, Recession Is Not Off.
Data is consistent with a recession starting in November or December.
When is the last time housing was down for a full year, industrial production down two months, and real spending down two months and the the economy was not in recession?
Factor in a decline in consumer spending in the EU, UK, and Australia and where are US exports headed?
And with consumer spending falling off the cliff, how long will jobs stay strong? Strong enough to prevent a recession that history suggests has already started?
In Wonderland, jobs will save the day, assuming you believe the December Jobs data, but I don’t.
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