As Fed Blows Bubbles, US Consumers Fall Further Behind, Where’s the Trickle, Ben?

Wall Street pundits are only concerned with how top line retail sales did this month. In reality, they’re looking at inflation and the spending of the  top 10%, not growth in the volume of sales, and not broader growth in real retail demand. With the CPI data posted today we can drill down and see how the average US consumer is doing. It looks as though he or she isn’t doing too well. The majority are buying less, not more. The idea of the “resilient US consumer” is a myth. Only the top 10% or so is resilient. The rest are running in place or losing ground.

Real Retail Sales Ex Gasoline Per Capita - Click to enlarge

Real Retail Sales Ex Gasoline Per Capita- February down 1.7% vs. year ago – Click to enlarge

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Real Retail Sales Ex Gasoline Per Capita for February 2013 totaled $596.98 in 1982 constant dollars. That was 1.7% below the year ago level. That was the second year to year decline in 3 months. December was down by 0.7%.  January had an increase of 4%. One decline could be an anomaly, but twice in 3 months we need to begin to worry.  On a rolling 3 month basis, the last 3 months are only 0.4% ahead of the same period a year ago, and with 2 declines in 3 months, we have to wonder if even a near zero growth rate is sustainable.

This month’s decline in per capita spending was  more than double the 0.7% decline in total real retail sales ex gas. Apparently the majority of Americans are losing ground faster than the top few percent is gaining. Where’s the trickle down Dr. Bernanke?

The February number now stands 6.1% above the level of 3 years ago, which was the absolute bottom for this figure coming out of the recession. So there’s been some recovery. However per capita spending on everything but gas is still 5.2% below the peak February level in 2006 at the top of the bubble.  It is just 1% above the level of February 2003, coming out of that recession.  Even though there has been some recovery since 2010,  most Americans have lost purchasing power over the past decade. The economy is technically growing but leaving most Americans falling behind.

Looking at this chart and considering this data, ask yourself how the Fed’s money printing, which is probably fomenting more disastrous bubbles right now, is going to help more Americans get good paying jobs that will enable them to halt the long term slide in their standard of living.  The last bubble did not do that. In fact, it made things worse for most Americans. Only the speculators and crooks at the heart of the easy money driven Ponzi scheme did better. Everyone else simply tread water through the bubble. When it collapsed, they did worse. And they have not caught up during the recovery phase.

Meanwhile surging gasoline prices are cutting into consumers’ discretionary spending on other things. The Fed wants credit for rising stock prices and housing prices, but will accept no responsibility for the rise in energy prices that is crushing most middle class consumers.

Why would the Fed expect the effects of the the bubbles it is blowing now to be any different than in the past? This is one definition of insanity.

This report is excerpted from the permanent charts page on Real Retail Sales

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today. 

  1 comment for “As Fed Blows Bubbles, US Consumers Fall Further Behind, Where’s the Trickle, Ben?

  1. joebhed
    March 17, 2013 at 6:34 pm

    Thanks so much, Lee.

    The story and its charts are indeed telling.

    They are the results of things that have happened and are happening. Somehow, they are supposed to inform our actions to improve our lot in what lies ahead.

    There’s a certain key component, maybe THE critical component, of our national economy that points the way forward.

    The critical component today is spending per consumer. Progress can only come about for the many by increasing spending per consumer.

    It’s not just because we have a theoretical consumer-centric economy.

    But, importantly, that is the outcome we are seeking, and we should look at monetary policy transmission vehicles that can result in an increase in consumer spending.

    There is only one major, but not insurmountable, obstacle to that progress.

    Because we have a debt-based system of money, we cannot obtain the money for more consumer spending without increasing debt.

    Catch 22. The lenders are in charge.

    The solution is the end of the debt-based system of money.

    Without that systemic change, the numbers that tell us where we’ve been will pass trough the worst of times.

    The Kucinich Bill ends the debt-based system of money. And provides the vehicle for increased consumer spending.

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