Overall self-reported daily consumer spending in stores, restaurants, gas stations, and online averaged $69 per day during June -- unchanged from May, and essentially the same as the $67 average of June 2010.Soft Patch Myth
Upper-income spending (among Americans making $90,000 or more annually) averaged $124 per day in June -- essentially the same as the $126 of May and not much better than the $119 average of June 2010. Although these Americans are likely to have more disposable income to spend freely when they choose, they continue to hold back and to spend within the "new normal" range -- which is far below what they were spending three years ago.
Implications
Flat consumer spending is consistent with today's low level of economic confidence. It also squares with the idea that the U.S. economy remained in a so-called "soft patch" during the second quarter. Further, even though gas prices have declined -- which would theoretically help increase consumer spending -- pump prices remain far above year-ago levels, and continue to reduce other spending.
The U.S. economy could regain momentum as Japanese auto plants in the U.S. return to building cars in the months ahead. Some economists feel the overall impact of the crisis in Japan on the supply chain worldwide, and on U.S. jobs in particular, has been greatly underestimated. If gas prices continue to decline, they should also have a positive, tax-cut-like effect. However, to this point, consumer spending shows no signs of such a rebound.
I believe this soft-patch, blame-Japan theory is not "greatly underestimated" but rather "greatly overestimated" and dreams of a huge second-half recovery will soon be shattered.
Regardless, it is illogical to blame high gasoline prices for lack of consumer spending when gasoline prices are part of consumer spending!
High gasoline prices may effect other spending, but Gallup includes gasoline in its daily consumer spending survey.
That said, consumers have a lot to be concerned about including a dearth of jobs and lack of real wage gains. Both of those negatives are likely to continue. Moreover, there is no pent-up demand for autos, and housing remains in the gutter. Therefore, there is little reason reason to believe in second-half miracles.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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